[Ensorceled]

> The insurance dealer does his job and tries to get a higher premium? Not surprised.

This is actually an example of where the author IS stupid. You will often be found "at fault" in cases where you are not actually at fault (the other driver lies better than your truth) and there are many cases (at least in Ontario) where you are legislatively at fault even if you did nothing out of the ordinary (making a left turn while overtaking traffic attempts to pass rather than yield). That the broker was trying to protect them from this isn't even a conflict of interest for the broker.

I wonder how many insurance brokers encounter the "I'm such an amazing driver, I don't really need insurance." macho man ... I'm presuming the broker, at least initially, assumed the author was one of "those drivers" and not "stupid".

[Zarel]

I don't think it's about who's at fault, it's about what risks you're willing to tolerate.

Insurance is always a trade-off of EV for tail risk. In exchange for losing money on average (the insurance company has to earn money somehow, after all), you're protected from the worst case scenario. You can think of it like, yourself from parallel universe where you don't get into a crash, pays yourself in the parallel universe where you do get into a crash. And the insurance company skims a little off the top as payment for the service of sending money across parallel universes.

But if you can afford to just eat the cost of a crash, you don't need to pay the insurance company for that service. And maybe you can eat the costs of some crashes but not others: If you crash into a rich guy's car, maybe you can't afford those costs, but damage to your own car is capped at the price of your own car. So that's all Dan's doing: insuring the costs he can't pay (damage to others) but not the ones he can (damage to his own car).

The math isn't affected by his chances of being found at fault, or how good of a driver he is, at all.

[kristofferc]

It's my understanding that most insurance companies earn most of their money by investing their float, not by paying out less than they bring in from customers.

[xapata]

No, it's the injuries you can't afford. Property damage doesn't add up to much (for some definitions of "much").

[tux3]

In defense of the author, maybe they have a dashcam and that's what increases their confidence.

But that's where I see a problem: this (or another reasonable thing) is not something that would take long to explain.

Looking stupid is a failure of communication. You're right, but you failed to give enough rope for others to follow, and that wastes everyone's time.

The improvement I'd suggest is to dig into why someome thinks you look stupid. You could think "they must be stupid", but that, in itself, is an overly simplistic and inefficient model.

[pja]

I think you’ve got that backwards - he wanted to only buy coverage for damage he did to other vehicles / people & not to cover his own vehicle.

However, sometimes, for some drivers, fully comprehensive insurance can be cheaper than 3rd party only for arcane internal insurance risk-accounting reasons. So by not letting his agent even look at the whole market he was cutting himself off from the possibility of cheaper insurance.

[lotsofpulp]

I am curious to the mechanics of how the accounting situation arises that an insurer would benefit from taking on more liability for less revenue.

The entire business is heavily regulated and based on accurately accounting and pricing risk. It seems suspect that a regulator would allow such an obviously mispriced insurance product.

[pja]

The explanation I saw was that people who buy comprehensive insurance are by and large regarded as lower risk than 3rd party only buyers & sometimes that weighting can tip the balance to make comprehensive cheaper than 3rd party, if the insurer thinks you’re otherwise a low risk buyer.

All insurers have to go on to gauge your risk are the signals available to them & the type of insurance you’re buying is a signal.

Whether this is still true in the modern world I don’t know - I probably saw this advice ten years or so ago on a well regarded money saving site.

[lotsofpulp]

Interesting, I had not thought of that. I have been purchasing auto insurance for over 10 years, and I get prices every couple years. I always buy extremely high liability only insurance because I can easily afford to replace my car if anything should happen to it. I have always found liability only insurance to be much cheaper than comprehensive and collision and liability insurance.

It would greatly surprise me if buying comprehensive insurance itself served that good of a signal to offset comprehensive/collision insurance for say, a $20k to $40k car.

[pja]

Yes, on the other hand if you own a $5k car then the insurer’s liability is much smaller & there are plenty of older cars on the road driven by older, safer drivers that fit into that category.

This was regarded as a weird corner case even then & was mostly just used as an example of why you should try tweaking various features of the insurance you were after, because the price could sometimes change in ways that might seem counter-intuitive.

[SilasX]

That ... still makes no sense. "Discounting insurance for revealed [lower] risk class" doesn't work if the insured can easily fake membership in the lower risk class, which is trivial here -- just ask for comprehensive!

What I think you might be confusing this with, is that one piece of the insurance is cheaper if you bundle it with others. That is, liability-only might be $50, but if you if you get liability + collision, it's $80, which breaks down into $40 for liability and $40 for collision. The insurer is taking more liability -- but also more revenue, so no funny business.

The "high-risk poor" can't "cheat" here because they can't afford the extra $30 to begin with, and "being willing/able to spend $30 just to be safe" is an actionable signal of being low risk.

But you still shouldn't have a scenario where you get strictly greater coverage for strictly less money.

[Kinrany]

There's also a scenario where only people who don't look at prices buy liability-only, which signals poor decision making or carelessness and justifies higher cost to regulators.

[lotsofpulp]

The phrase “not looking at prices” generally means willing to buy the more expensive products or services. If you buy liability only, it means you are looking at prices and coverage.

[lotsofpulp]

This makes more sense to me.

[JJMcJ]

They are not taking on more liability.

The insurance company now has no responsibility to repair the insured vehicle so they have less responsibility.

I suspect Collision insurance is very profitable compared to liability.

[lotsofpulp]

pja made the claim that in some instances, collision/comprehensive + liability can be cheaper than just liability alone.

I expressed surprise that collision/comprehensive + liability can be cheaper than just liability alone, since, on the face of it, the insurance company seems exposed to more losses due to possibly having to pay the insured for their car damages.

In my comment, I wrote liability referring to the insurer’s liability for paying to fix/replace the insurer’s car, not liability as in auto liability insurance where the insurance company pays others for damage you cause to them.

[JJMcJ]

Possibly willing to buy collision is a proxy for a generally prudent driver.

Also, skipping collision happens most often when driving a really cheap car, which can be a marker for a bad driver.

Actuaries actually have numbers for this things, but I am just speculating.

[throwaway0a5e]

> Possibly willing to buy collision is a proxy for a generally prudent driver.

It's a proxy for not being able to afford to fix or replace your car at the drop of a hat.

>Also, skipping collision happens most often when driving a really cheap car, which can be a marker for a bad driver.

Once again, just a proxy for money.

[jldugger]

> You will often be found "at fault" in cases where you are not actually at fault (the other driver lies better than your truth) and there are many cases

As I understand it, Dan wants to skip on collision / comprehensive, not liability. I can imagine a number of scenarios in which you might not want to bother insuring an asset, even as you insure yourself for damage to others you might be at fault for.

[JJMcJ]

Here in the US, and I assume in Canada as well, there are two main kinds of car insurance:

Liability - that pays for damages/injuries to others

Collision/Comprehensive - that pays for damage to your car

It sounds like the author wanted Liability but didn't want to pay for Collision. If you have significant assets and/or a cheap car, it may be to your advantage not to get the collision. Except he didn't use the customary terms but described them rather elliptically.

In fact, take the money you save on Collision and get more Liability is not a bad idea.

[the__alchemist]

I don't think that's what the author was getting at here - a compelling reason is that the value of the payout to fix your own car x the probability of it happening is lower than the total premium extra. Eg the "Insurance is only worth it for things you can't afford" mentality.

This also checks with the OP in this subthread: The insurance seller will always push for more coverage for self-interested reasons.

[SilasX]

That's opposite my experience: I took an appointment a few weeks ago from my insurance agent (Texas) who wanted to review my existing insurance vs my needs. On the call I laid out that same logic -- I can afford repairs to my car out of pocket, so it doesn't make sense to insure it, so maybe I should drop it (just keep liability) -- and she agreed, and was happy to tell me the savings!

(I didn't go through with it on the call and maybe she would have put up resistance then, so who knows.)

Edit: From reading the source, it seems like the author didn't clarify that that was the logic he was using, or that he could afford the damage to his car out of pocket. Insurers are probably accustomed to people overextending themselves and skimping on insurance without being able to afford such things, which is risky and something agents have to head off early on.

[TheCoelacanth]

Salespeople have different strategies, so you aren't always going to get one who tries to sell you a bunch of stuff you don't need.

Some will try to milk you for all you're worth. Others will try to stick to things that you plausibly need and hope that selling to more people and having a higher renewal rate will make up for the extra amount that they aren't squeezing out of each person.

[bittercynic]

It may be an unusual preference, but I don't think there's anything wrong with it. Maybe he drives an inexpensive car and can afford to repair/replace it himself, so he doesn't want to pay the premium to insure against that risk.

[blitzar]

As with all voluntary insurance, Its the price, stupid.

$100k for coverage on your car? No thanks. $1? Sure. $1 but covers litterally nothing and has a million dollar excess? No thanks.