Slate is deeply confused about insurance

[Imran Siddiqui]

On that note, and maybe my brain isn't quite in gear yet this morning, but wouldn't adding "young invincibles" under the Baucus catastrophic policy still increase the insured population? I get that they'd pay less in premiums than if they bought the same plans the old folks do, which would mute the effect of their inclusion in the pool somewhat, but this seems like a "half a loaf is better than none" situation, rather than keeping them out of the pool altogether, as Noah seems to be complaining about. Am I just overlooking something here, besides the horrific nature of my last sentence?

Depends. Its a different form of "insurance" though, isn't it? It is less spreading risk if they only have to by catastropic plans. And those plans aren't the same as the insurance everyone else is getting. So maybe its splitting hairs, but that's kinda where this whole discussion has been anyways.

[rah]

While small areas might have shelter from the storm, it's still a natural disaster of epic proportions. Individual health insurance is not really comparable to hurricane insurance.

Yes, small areas have shelter or have never been hit. Just like youngsters. Some hurricanes produce a small number of claims. Some produce more, just like different age groups. Not that different.

And note, insurance companies don't make much in profits from premiums. Most of their income is from investment income. Heck the payouts for hurricane andrews were more than every single premium dollars that had ever been paid into the system at that point. But that doesn't mean money wasn't made and it sounds great when you're asking the insurance commision for permission to raise rates.

[MRT144]

And note, insurance companies don't make much in profits from premiums. Most of their income is from investment income. Heck the payouts for hurricane andrews were more than every single premium dollars that had ever been paid into the system at that point. But that doesn't mean money wasn't made and it sounds great when you're asking the insurance commision for permission to raise rates.

And this speaks to the problem of correlation of catastrophic events affecting more than just claims filed.

[Drake Tungsten]

1. A low risk-low premium only pool won't be able to survive a black swan event.

For the love of god, please don't help popularize Taleb's dumb "black swan" terminology.

[Solomwi]

Depends. Its a different form of "insurance" though, isn't it? It is less spreading risk if they only have to by catastropic plans. And those plans aren't the same as the insurance everyone else is getting. So maybe its splitting hairs, but that's kinda where this whole discussion has been anyways.

You're probably right that it's splitting hairs, but what you say here is what I was trying to get at. Forcing Group A to buy some insurance, but allowing them to buy a cheaper plan than the one Group B chooses to buy isn't so much allowing them to opt out of the pool as it is allowing them to stay in the shallow end. As long as Group A and Group B are insured by the same entity, the risk is spread across both groups, regardless of whether everyone has the same policy.

Of course, this is based on the simplified premise that Group A will not make significant claims, and therefore only serves the purpose of broadening the risk pool. The only relevant question about Group A under that premise is how much money you can get from them to put into the pool so you can cover the claims of Group B, which is a political question. In essence, Noah seems to me to be complaining that a politician has compromised on a political question in order to advance a political goal. That's why I wanted to see if I was missing something.

[MRT144]

1. A low risk-low premium only pool won't be able to survive a black swan event.

For the love of god, please don't help popularize Taleb's dumb "black swan" terminology.

Six Sigma better?

[Drake Tungsten]

"Unknown-unknowns"

[Blaupanzer]

"Insurance, after all, works only to the extent that it can spread risk among a diverse population." -- Noah

This is horses**t as written. I believe he is referring to age and relative health diversity. Nonetheless, this is nonsense to insurance as a business.

As a statement of a right or privilege where the goal is to "break even," this statement might indicate a goal. In essence that says let's gut a reasonably functioning business model, including profits, and replace it with a tax-based, break-even system. The Dems are claiming the government would only provide one option different from that of the current insurers. So where do they get off dictating who is in which pool at which rate. This is getting genuinely disgusting and confusing based on a lot of nonsensical inputs, left and right.

[Arrian]

In essence that says let's gut a reasonably functioning business model

I don't think the current model functions reasonably well. It does generate profits for some businesses, but it also ****s over a lot of people.

The Dems

Are producing a ****ty bill, yes.

-Arrian

[MRT144]

"Unknown-unknowns"

That doesn't even begin to quantify the statistical distribution of those unknowns.

[Drake Tungsten]

The whole danger of "black swan" events stems from the fact that you can't adequately assess the risk that they pose, precisely because they are "unknown unknowns".

[rah]

That's what reinsurance is for.

[MRT144]

That's what reinsurance is for.

Reinsurance is pretty good except when it totally fails (and part of that failure is when it encourages more risk taking). Making sure you know where the retrocessionals is just one piece of the puzzle.

[MRT144]

The whole danger of "black swan" events stems from the fact that you can't adequately assess the risk that they pose, precisely because they are "unknown unknowns".

Which makes the over-reliance on models even more disastrous.

[Drake Tungsten]

What other option is there?