alt Hacker NewsIt seems to me that risk pooling kind of negates of the intent of insurance, ie. to spread out risk.
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girvo • yesterday at 10:10 PM
Well of course, the actual intent of insurance today is to make profit.
It seems to me that risk pooling kind of negates of the intent of insurance, ie. to spread out risk.
Well of course, the actual intent of insurance today is to make profit.
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.