Am I missing something, or do insurance companies have an…
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Am I missing something, or do insurance companies have an almost unbeatable business model?
Insurance seems like an infinite money glitch to me, and I’m trying to understand what I’m missing.
Take car insurance. I pay every year in case I crash. If I never crash, the insurer keeps all that money. If I do crash and make a claim, they pay for repairs—but then my premium goes up because my history is no longer clean. Over the following years, it feels like I end up paying back what they paid me anyway.
Meanwhile, insurers collect money from all the people who rarely or never make claims. People are even incentivized not to use insurance, because if they can afford to pay out of pocket, they may do that just to keep their history clean and avoid higher premiums. Yet people still have to carry insurance because the law requires it, seemingly everywhere.
From my perspective, the insurance company seems to win either way: it keeps premiums from people who never claim, and raises prices on people who do. Where is the real risk for the insurer? Why can’t everyone just start an insurance company if the business is this profitable? What are the downsides, and why isn’t this basically an infinite money glitch?
#conversation
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Insurance seems like an infinite money glitch to me, and I’m trying to understand what I’m missing.
Take car insurance. I pay every year in case I crash. If I never crash, the insurer keeps all that money. If I do crash and make a claim, they pay for repairs—but then my premium goes up because my history is no longer clean. Over the following years, it feels like I end up paying back what they paid me anyway.
Meanwhile, insurers collect money from all the people who rarely or never make claims. People are even incentivized not to use insurance, because if they can afford to pay out of pocket, they may do that just to keep their history clean and avoid higher premiums. Yet people still have to carry insurance because the law requires it, seemingly everywhere.
From my perspective, the insurance company seems to win either way: it keeps premiums from people who never claim, and raises prices on people who do. Where is the real risk for the insurer? Why can’t everyone just start an insurance company if the business is this profitable? What are the downsides, and why isn’t this basically an infinite money glitch?
#conversation
source
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