It will have the effect of increasing premiums for all participants, so I'm inclined to agree.
Particularly for insurance such as LTC, if you can determine (for yourself) definitive need for the insurance - you will absolutely buy it. But at that point you are not seeking insurance because you have certainty. Rather, you would be cheating everyone that has purchased "insurance". All other participants will soon cease opting for LTC insurance due to expense unless they too have knowledge of definitive need.... LTC companies pay operation costs, salaries, bonuses, become inslovent, file for bankruptcy, and no one else gets anything.
There will always be insurance companies as long as they can formalize a bet where they expect people to pay more in premiums than what they expect they need to pay out.
As long people get a feeling of security, there will also be people willing to pay more in premiums than what they expect to get out.
If people start gaming the system, and DNA testing become very accurate in predicting the future (current commercial DNA testing is not even close), then what will likely happen is that big payouts will go away. It will have enough limits, caps, restrictions and conditions in order to rebalance the risk assessments in favor of the insurance company.
>> Rather, you would be cheating everyone that has purchased "insurance".
That is a very north american definition of insurance. But insurance companies are not collectives. They are for-profit corporations, probably with a PO box in Delaware. Buying an insurance plan isn't like moving into a commune. It is a risk-shifting arrangement with a corporation, a formalized financial hedge. When I buy insurance I don't much care about other customers. They aren't part of my transaction. Maybe I am the only customer for a product. That does happen. It doesn't impact the obligations of the parties.
The point the parent is making is that if you know in advance that you, will need to use the insurance, and you decide to buy it on this basis, then the premium the insurance company charges will need to increase to account for this, or the insurance company will lose money.
Since the premium has increased, the only people who will still pay the higher premium are those that know they will need to make a claim. The premium will therefore rise to the point where _only_ the ones with that extra information will pay.
Insurance markets cannot survive with this kind of information asymmetry.
This is not a North American definition. This is what insurance is.
> When I buy insurance I don't much care about other customers. They aren't part of my transaction. Maybe I am the only customer for a product. That does happen. It doesn't impact the obligations of the parties.
Unfortunately that's not actually how it works with shared pooling of insurance resources. You pay a monthly fee that gets bundled with the fees from other customers and paid out when there are claims against insurance.
If your care was only paid out of your pool of money you've paid into the insurance system, your first month of payment would cover essentially nothing.
The "local pool" is irrelevant. The care is paid out by the insurance corporation. How and where they get the money is thier business. They could get it from selling chickens. All that matters is that they pay.
What about one-off custom policies with a "local pool" of one customer? Such products are made every day.
> How and where they get the money is thier business.
> They could get it from selling chickens.
Insurance is a regulated industry and those statements would be terrifying. You have to prove to the state that your mathematics will work into a functional business and have to maintain certain liquidity requirements.
> All that matters is that they pay.
Yeah, and that's one the reasons companies don't like paying since it can dip into their liquidity.
That's beside the point. Insurance is basically just another way to invest wealth. An insurer simply needs to have cash somewhere safe to cover the possible payouts they might reasonably need to make. It still can be a single customer.
This is a very North American discussion, dunelover, though Canadians might have a bone to pick with you concerning your categorization. While I don't imagine that insurance companies will cease to exist, I do imagine that benefits of these plans will become next to nonexistent and the cost will increase dramatically. Though it may end with differentiation and one plan might be available for traumatic injury and one for genetic disorder, exclusively. Regardless, the point stands, if the party that's supposed to pay the bill for my party has even greater incentive to litigate, then I likely will be SOL. And, you're absolutely right, it isn't very much like a commune. However, my insurance rates in North America keep going up because people are unhealthy & overweight and we've subsidized corn sugar into everything edible. For-profit insurance companies are what 'we' have and they have formalized the average cost of care into their hedges. You are not in an insurance bubble, you are in a world of statistics and actuarial science.
