[fighterpilot]

> profit margin is the same in both cases

Profit margins would actually be bigger in the case of more profiling. Absent profiling, insurers open themselves up to much more negative selection (e.g. old people being more likely to purchase cheap health insurance that's subsidised by the young), which has the effect of increasing premiums for the customer, decreasing margins for the insurer and chasing away the customers that are the least likely to need to make a claim.

[drdeca]

Does this hold in the perfect competition limit? Doesn’t the perfect competition limit have profit margins of approximately zero?