It is.
Sometimes the writer will add "didn't respond before press time" to give a little more context, but most readers won't grasp what that could really mean (like the reporter might have contacted them 15 mins before press time)
Here's a current story. No idea of this news source but it is widespread. CNN is in a defamation lawsuit directly related to not waiting for a response to straighten out facts.
With the internet, even the disabled and really old and infirm people can find ways to connect with others, alleviating (somewhat) the social isolation aspect of wanting to take a "long walk in the woods". My gut tells me that newer generations who basically are raised with internet access from day one will have little problem with this.
No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically.
1. Know your insurance contract, know what's actually covered and what not (sometimes describing the same facts in two different yet truthful ways will result in your claim being accepted or denied) and have a non-shit insurance company (check reviews that talk about how they handle claims or ask friends that had claims).
2. "Self-insure" risks where the variance won't hurt you. In other words, if you can grudgingly eat the loss if it happened, don't get insurance and eat the loss if it happens. If you have a lot of disposable income, you don't need insurance for something that won't noticeably shift your budget. Likewise, pick high deductibles. What would you rather do: Eat a $300 loss, or have paid $200 in additional premiums and spend two hours of filling out their paperwork?
3a. An exception is if you just really want the peace of mind, are willing to pay for that, and think you can find an insurance company that will actually pay.
3b. Another exception is if you think they miscalculated the premiums. I know that this is unlikely, but it ties into the "peace of mind" criteria - if you think a risk is more likely than it actually is, just insuring it might be an easy way out. The premium might also be accurate for the average, but you might also think or know that you are at a significantly higher risk than average.
For the latter two points, I like to consider insurance cost "per decade" or "per lifetime".
> No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically.
No, premiums don't need to cover payouts. You have to pay the premiums before you get any payouts, so the company invests them and makes money that way.
Off-topic, I find people have a similar misunderstanding of FAANG compensation. Functionally, the salary + RSU + bonus + refresh structure is equivalent to a larger salary (enough to cover fees for the following procedure) where you take out 4-yr loans every year to invest in the company stock. With that in mind, listing the realized stock growth when describing total compensation always felt a bit disingenuous.
100% is a bit uncommon. Take that at face value though. BigCo tech companies have much lower salaries than what you can get elsewhere. Compare a salary of X/yr plus a 4-yr RSU grant of X/yr to a salary of 3X. You absolutely can get a 50% partially secured loan for 4X to obtain similar payment characteristics to the BigCo offering (speaking in round numbers to keep the math simple, and ignoring fees, hedging, ... because they change exact thresholds and other minutiae rather than the core of the argument).
It's not their job. It would be easy to adopt laws requiring insurance companies to separate insurance pool money (used to pay out insurance) and operational money (used to pay employees and profits), and have these separated when showing the price of insurance. That would reduce the moral hazard of insurance companies paying profit out of the pool.
It can actually make it worse, and creates different Hazards.
When it does work is when insurance has no influence on the price of goods, and is a minor consumer. For example, when fire insurance pays to replace your goods that burnt up.
When it doesnt work is when insurance is the predominant purchaser of those goods. A good example would be US health insurance, which has an 80/20 rule just like your proposal. Health insurers by law (ACA) must pay out 80%, with 20% allowed for opex and shareholder returns. The Hazard is that as an industry, to increase returns, you want the cost of care as high as possible, thereby maximizing your allowable profit.
It is a similar problem to how power is regulated in California, which has a mandated profit cap as a percent of costs. As a result, these regulated companies have the highest opex and cost of power in the nation of approximately $0.50/kwh
What you're talking about is a market failure, basically admitting that markets don't decrease prices in many cases. Which is a much deeper rabbit hole.
My proposal even doesn't say what the ratio should be. If there wasn't legally defined maximal price margin (say 20%), I don't see what it would change in your argument - the companies would be free to ask for even more. Conversely, there is nothing that prevents the companies from lowering the margin as a result of competitive pressure from consumers.
There is an incentive for companies to increase prices, regardless of the price cap, aka "profit motive". That we can agree on.
My question is about the incentive to decrease prices (e.g. due to competition). Why it should be affected by the price cap? That's what you need to explain.
The competivive effect is not damped by price caps. It still exists (or doesnt), in the market place.
You usually see %profit caps as a failed band-aid in markets with poor competition. For example, customers usually dont have a choice in electric company.
There is also really poor competition in health insurance for a number of reasons. Insurance is tied to employment and both options and mobility are limited. Within those options, it is verry difficult to discern differences. I certainly cant tell if a 10% cheaper plan is that way because it is more efficiently run, or if it provides 10% worse coverage.
Last, while firms may compete on total price, they can collaborate to raise the costs for the industry at large. For example, health insurance companies would want to wholesale price of drugs to rise for everyone.
Im not saying that %profit caps are worse than unfettered monopolies (although they might in some cases). My Point is that profit can have huge market distortions, and economically sound solutions would focus on addressing the fundamental issue of poor competition.
I've always wondered how expensive a good insurance policy is. One that is actually good for you the policy holder and enforced by contract. Like no haggling over market value because the items are insured for specific amounts.
homeowner's insurance approaches this if you know your agent (as in you've physically seen them) and the two of you have an understanding that you're going to be recording the purchase price (or market price, whichever is lower), date of purchase, serial numbers, and any other identification of all objects you want insured. If you do this, my understanding is that they cannot then do "replace toaster: $8; replace TV, Onn brand 42inch $170;" and so on. If your item's market price goes up in the meantime, the policy will have verbiage as to how that gets resolved. For example if i have a policy on something that is no longer being made, i can either be reimbursed for the price or a suitable replacement.
Generic, cookie-cutter, boilerplate policies probably net the insurance companies a fair amount of profit. People who actually care about the actual items they are insuring are possibly the highest risk, and as such, the premiums are also the highest. In my state, an umbrella policy that would cover my home, land, frontage, vehicles, farm equipment, well pump, etc is ~$500/month, with limits of around $1mm (this was 8 years ago or so, they probably went up in premiums). a half million on two vehicles is only about $200/month and homeowners varies but is ~<$100/month. The issue is how i'd get the rest of the stuff i said insured, because in my state, the homeowner's policy doesn't cover anything but the home (and contents to a limited extent) and whatever you call a tree on your property falling down and causing injury or damage not due to negligence.
The international code of insurances says goods cannot be insured for more than their worth. The intent was to avoid perverse incentives, the result is our current society.
> The international code of insurances says goods cannot be insured for more than their worth. The intent was to avoid perverse incentives
Would you mind explaining what the perverse incentive is here? If I want to insure a pillow that I claim is worth $1 million, why should it matter what others are willing to pay for it?
If they let me insure my stuff for 100x of what it's worth, I lose all the incentive to prevent damage.
Even in the legit cases the insurance companies have to account for the "don't worry, it's insured" mindset. Keeping the ceiling on the insurance value is intended to leave at least some of the incentive to prevent the damage with the owner.
The insurance companies cannot rely solely on the "don't be careless" contract clause.
> If they let me insure my stuff for 100x of what it's worth, I lose all the incentive to prevent damage.
So what, though? Can't they just adjust the premium to account for that? It's not like they can't do their own modeling of what the item is likely worth -- if they see it's 1% of what you stated, then they can just as well cite you a ridiculous premium so that you wouldn't feel it's worth it. What's wrong with that?
> For example, if I had a 15 year-old, unremarkable used car but insured it for $1m, then I'd have an incentive to leave it parked (but locked!) in sketchy areas of town in the hopes that it would be stolen.
No, you wouldn't if the premium is high enough (i.e. your net gain from doing so is small enough).
In theory nothing, in practice it's just not worth it. Mind that the bad effects would also spread broader than a voluntary contract between two parties.
We'd have to fund the courts to resolve the inevitable insurance fraud accusations, not to mention the additional firefighting crews to put out the additional fires that consume the $1 pillows.
The difference between gambling and insurance, is whether you have an insurable interest.
It makes the market for insurance much better if everyone actually has insurance. Because it reduces cost. It also keeps the industry legitimate, preventing gambling legislation from applying, and anti-gambling activists from targeting insurers.
You'll have to go to a bookie if you want to gamble.
You're definitely right -- it's interesting, but it's not making me any more sympathetic, because I fail to see why the lack of insurable interest is something the premium can't account for, and they fail to provide any explanation of that.
As far as insurance gambling goes, it feels fundamentally different? In gambling, the "house" that sells you the ticket sets the rules and introduces the element of chance. In insurance, the entity selling the financial product here is in no way in control of the outcome, which is the exact opposite of gambling.
Because premiums will rise across the board, so people with an insurable interest pay premiums set for people who intend to gamble or manipulate their insurance.
By demanding an insurable interest, insurance companies keep out gamblers and frauds. It also helps strengthen the idea that insurance shouldn't be abused or manipulated for a payout.
I don't see why this is true. The insurer still knows the item and its market value. So if the insured amount is higher than the market value then it only needs to increase the premium in those cases, not for everyone else.
The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition.
> The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition.
This doesn't pass the smell test, though. The premium would take care of that. You've told them you have a pillow, and that you want it insured for $1M. They could easily look at it and go "hm, this is worth $10", and give you a absurd premium of $999,900 in exchange for your absurd valuation. So happy accidents won't be worth it anymore. What's wrong with just letting the premium take care of it?
You have simply rephrased the actuarial rule "don't insure item for more than its actual value". The "premium" you describe just inflated the value of the item.
Walking back from the pillow analogy a bit, I'd happily pay for homeowner's insurance that also covered lost wages, a temporary rental place, legal fees, and the other incidentals likely to arise in a fire or flood (as opposed to paying whatever high deductible I'm comfortable with on top of those other large, unknown costs). Adding those to the policy would necessarily go beyond the home value. Is that level of excess allowed?
> Offering a deal that nobody honest would take is a waste of time for everyone involved.
I'm not suggesting any insurer should be forced to offer a deal. They're welcome to just shrug and tell you to pound sand. What I don't see is the logic behind having an international code prohibiting the offering of such deals. Is the international code trying to dictate to the insurance company what is worth their time?
> why should it matter what others are willing to pay for it?
Because the actual value of the item determines your incentive to commit fraud.
If you insure a $10 pillow for $10, when you damage your pillow, you personally will definitely be out $10's value in goods in the hope you'll recover that $10 later. Since your only outcome is mildly negative, you don't have any incentive to file a false claim.
If you insure your $10 pillow for $1 million, as soon as the insurance is in hand, will have a strong incentive to destroy the pillow and try to collect a million dollars, since $1 million - $10 = $999,990.
This incentive exists regardless of what premium you had paid for the insurance (since it was a prior cost), and can't really be perfectly mitigated. Yes, you can criminalize fraud, ask for evidence, etc. but courts aren't perfect and it's always possible to be clever and fool people.
Also, some people are honest, and others are dishonest. An insurance company can't perfectly tell ahead of time who is who. Let's say I quote you $500k premium to insure your pillow for $1mm. A fraudster will see this as an opportunity to profit by $500k - $10. An honest person would see this as a terrible deal. Therefore only fraudsters would take this deal. If you continue to work backwards, as an insurance company you know there's no premium that you could quote that would end up in honest people taking this deal—there's no stable equilibrium where the premium charged ends up outweighing the (potentially fraudulent) claims.
Btw, this situation is famously described in George Akerlof's paper The Market for Lemons (he called it "market collapse"):
Another way to see this: rationally as an insurance company, if you ask me for a policy for $1mm on a pillow, due to the risk of fraud I will likely be quoting you close to $1mm as the premium. You (as an honest person) rationally would never take this policy. Therefore, I shouldn't even bother offering it, to save everyone involved time and energy.
What depends on the premium? In my mind, you state the item and the value, they tell you the premium they would cover it at. Where's the perverse incentive, and why is it relevant what anybody else would pay for it?
Surely there's some middle ground between the sibling thread where it's insured for 1000x and the situation I and many others find ourselves in with insurance dealings where the insurance company digs up some sale in a private database by a wholesaler in Szechuan, calls that the "market price" and then cuts you a check that doesn't even come close to replacing the item, usually a car.
I would love a clause in the contract where for non-rare goods you have the option to have the insurance company make you whole by buying you a same model, same trim or higher, same miles or lower, same year or newer car. Like you claimed the market price was less then half of what I can buy it for, use whatever contacts you clearly have and buy it for that.
My doctors have been like that too. I have to pull their teeth when I want some sort of screening done or want to see a specialist, but because I'm relatively fit, healthy, with no family history of anything "bad", they say my risk of things is low.
I don't care. I just want peace of mind. Cost isn't even an issue, I would be willing to pay a decent sum to get regular screenings so I'm not blindsided with some stage 4 diagnosis down the road.
BTW The American Cancer Society recommends colonoscopy screenings starting at age 45 routinely now if there are not other indicators to start even earlier.
Is it doctors, or is it medical administrations reluctant to deal with "selling" your insurance provider on covering you for a service?
At least in the US, I've found that if you're paying cash up-front, you can shop around for what you want, without referrals, and without this kind of hesitation.
I feel like it would be easy to just mandate stores to have to allow for cash transactions. It seems simple to enforce too, just walk into a store and try and by something with cash. If not, report/fine.
As a Canadian, I also feel like there are so many more pressing issues right now, like housing, employment, inflation, immigration. Does this cash/cashless issue somehow affect one of these things?
> I feel like it would be easy to just mandate stores to have to allow for cash transactions.
While cards have fees, cash has overhead too: you need to go to the bank for deposits, make sure you have enough change, worry about people walking in robbing your till (thus traumatizing staff), keeping a balance (to reduce 'shrinkage' from employees).
Yes, it is "easy" to mandate it, but that is adding a 'regulatory burden' to business owners.
It's also problematic for the thousands of solo micro-businesses that operate in markets and pop-ups now (i.e. Etsy IRL). Most of them have a phone and a Square dongle, and that's it.
Asking all those one-person shops and merchants to start carrying around a float and writing out paper receipts (or having some kind of battery-powered till+printer) is a pretty big burden.
Stores have been doing this since the dawn of...stores. Or at least when currency was first invented. There are very established processes and practices for this sort of thing. It's a cost of doing business, in the same way people pay for rent etc. for their stores.
Right, but now there are more efficient systems (the aforementioned Square dongle). We usually welcome technological progress that reduces costs, why opppose it in this case? The colourful pieces of paper and specially squished lumps of metal have been obsoleted. The solution isn't to force people to keep using cash, it's to make an electronic money system that has the good properties cash has (issued and backed by the government; directly tranferable between payer and payee; mostly anonymous but theoretically traceable in case of massive theft/fraud).
TBH I don't see why the market sellers should have to pay for that. Like I said, the solution is to offer a privacy/freedom/etc-preserving electronic payment system that is a real successor to cash, but still has the low costs that make businesses want to go cashless and the convenience that makes consumers want to.
None of this solves the simple visual of "I'm running out of cash in my wallet, better slow spending down"
I could log in to my bank online and check, I could keep a mental tally of "I spent this here and that much there, I should have this much...", but both of those are decidely more work.
Furthermore, every time I switch back to cash (and my fiancee has independantly noticed), budgeting and saving gets easier. Once again, likely because of the visual and tactile nature of cash
Most damning of all, guess how well credit and debit worked during the multi-day Rogers outage a few years ago. You say "That was a once in a lifetime fuck-up", I'll say "That's not the only reason or time stores haven't been able to process cards"
I'm under 30, and I remember grocery stores around holiday time being unable to accept anything but cash.
Electronic systems aren't actually a solution here. We have a solution, it's called cash; it does not rely on what is essentially a duopoly (Visa/MC), it does not rely on asking permission from a handful of gatekeepers (for-profit banks you'd like to transfer to/from)
Credit unions aren't the solution to the latter either - you can use one, but anyone you're trying to pay is almost certainly with a bank.
Reading a number on my phone screen is a much easier way to measure how much money I have than staring into my wallet and counting up the notes and coins. It's literally a finger tap away.
You are also eliding all the positive features of electronic payments, like being theft-proof, being much quicker to pay with, and being trackable for my own benefit.
> for-profit banks
The banks run their retail banking businesses as a loss leader for their savings accounts (the "deposit franchise"). If all the banks were mutualised transaction costs would probably go up, not down. Also, doesn't exactly the same argument apply to cash? Where do you think businesses get their cash floats from? They get them from banks.
Adding regulatory burdens to voluntary transactions doesn't really seem to be in the spirit of expanding freedom to me.
There's certainly an argument to be made that the privacy benefits or the inclusionary benefits are worth the hit to people's economic freedom, but don't pretend there isn't a tradeoff here
> The right move here would be to force banks to accept them and/or as a society pay for a system where they get access to electronic money.
It's not just about forcing banks, but also about the people trusting banks and institutions, which have historically not been kind to (say) black people. Lots of folks could perhaps (e.g.) not be able to keep minimum balances that would avoid monthly service fees, then you get dinged for NSF, but of course you can pay for overdraft coverage.
It's why some suggest (government) post office accounts are a useful tool for dealing with this: profit is not a motive, so all of these hoops can hopefully be avoided.
On the trust of the institutions part, this is sadly true, there's a lot of baggage.
In this day and age I think that ship has sailed, in that it's hell to try to live without a smart phone and online payment. Missing a payment because they needed to go pay cash on friday evening and couldn't make it, phoning around to find on duty doctor on a saturday night etc. are things that will become more and more of a hurdle as vulnerable people make the move to the more beneficial online equivalents.
Too many critical things are already impractical to deal with the old ways.
Some EU countries force banks to provide minimum service to anyone with a valid identity.
The good part is these accounts have no checking service nor overdraft possibility (any action is done in real time towards the actual account balance, there's no payment coming it two days after the fact with no money to clear it, and anything that bounced is just unpaid, with no additional punishment on the bank side). The bad part is the service provided is really minimal and online banking will often not be included, and at best will be an extra fee depending on the bank.
The fact that many such businesses have become cashless suggests that the ROI of accepting cash is not worth the cost/burden. Therefore it’s not a fundamental “cost of doing business” and instead just a mechanism to reach a subset of customers that prefer cash.
I agree that mandating businesses to support cash is unnecessary regulatory burden. After all, shouldn’t it be the shopkeeper’s right to do business how they please?
They take away your freedom in one area X, and when they want to take away your freedom in another area Y you go, "it's ok, we have bigger problems like X".
Some US jurisdictions do require businesses accept cash. My company would love to stop taking cash, but because some locations are in those jurisdictions it's easier to just take it everywhere.
reply