that's the fundamental paradox of modern underwriting.
insurance relies on what philosophers call a veil of ignorance. it only works if we're spreading stochastic risk things that might happen to anyone.
once data gives us perfect foresight into a 90% chance of a million-dollar claim, it’s no longer insurance; it’s just a pre-funded bill. at that point, the pool isn't spreading risk, it's just facilitating a direct wealth transfer. the 'good' risks realize they're just subsidizing a known event for others and they flee the pool, which is exactly how the market for things like LTC collapses.
we're basically at a crossroads where better data is actually making 'insurance' as a concept mathematically impossible for certain risks.
why would I agree to that when I'm not at risk of that? (Assume for discussion I have had this tested - whatever it is). I have my own life and like everyone more things (including vacation...) I want to spend it money on than I have money.
Some of us think that a key aspect of society is that we take care of each other. If something terrible happens to you before you manage to amass a fortune, it’s nice to live in a society that won’t leave your family destitute.
that's the fundamental paradox of modern underwriting.
insurance relies on what philosophers call a veil of ignorance. it only works if we're spreading stochastic risk things that might happen to anyone.
once data gives us perfect foresight into a 90% chance of a million-dollar claim, it’s no longer insurance; it’s just a pre-funded bill. at that point, the pool isn't spreading risk, it's just facilitating a direct wealth transfer. the 'good' risks realize they're just subsidizing a known event for others and they flee the pool, which is exactly how the market for things like LTC collapses.
we're basically at a crossroads where better data is actually making 'insurance' as a concept mathematically impossible for certain risks.
This might sound crazy, but what if everyone in the country gave extra and as a result everyone in the country was covered?
why would I agree to that when I'm not at risk of that? (Assume for discussion I have had this tested - whatever it is). I have my own life and like everyone more things (including vacation...) I want to spend it money on than I have money.
Some of us think that a key aspect of society is that we take care of each other. If something terrible happens to you before you manage to amass a fortune, it’s nice to live in a society that won’t leave your family destitute.
Well of course, the actual intent of insurance today is to make profit.