[xboxnolifes]

> In an ideal world, such data-harvesting might lead to cheaper prices / a more efficient insurance market - which would make the privacy loss worth considering from a trade-off standpoint, at least in theory.

In an ideal world (read: perfect information knowledge), this would lead to insurance being a bad deal for every consumer of it. In the theoretical position where insurance companies can accurately price each individual customer based on their habits, they will charge them exactly what they cost _plus_ a margin.

This is only useful for a consumer if they cannot access cash or a credit line to pay for a sudden large expense. Instead, insurance effectively becomes paying the credit line ahead of time.

[jowea]

> This is only useful for a consumer if they cannot access cash or a credit line to pay for a sudden large expense.

Isn't that the main point of insurance?

Insurance can also socially redistribute bad things. Which fair enough it is in practice a result of insurance but I don't think that's what it was invented for. And indeed the better the insurer's crystal ball the smaller this effect is.

Although in practice I don't think there ever will be a crystal ball good enough to make insurance a bad deal for everyone like that. You always have to insure against another driver being bad or just plain bad luck.

[garaetjjte]

>Isn't that the main point of insurance?

No, insurance claim can be larger than sum of lifetime premiums, contrary to credit.

[brewdad]

Again, that’s the point of insurance. Most of us will pay more in premiums than we ever get paid in claims. A few of us will avoid bankruptcy because insurance will pay out a claim we can’t otherwise afford either through cash or any line of credit we could get.

The trick is no one can know which side of the ledger we’ll fall on. You can be the world’s safest and best driver and still get t-boned by a driver with no assets and no insurance.

[mindslight]

No, the point of buying insurance is to reduce your individual variance even though your average cost goes up. It's not an individual savings plan, but rather shared pooling of risk.

[xboxnolifes]

In a perfect information world, there is no shared pooling of risk. You are paying exactly what you will cost, plus margin. That is the point im trying to make.

[mindslight]

By "perfect information" do you mean the ability to predict the future? Because that is what is necessary to make your statement true.

Because in general no, people buying insurance do not pay in what they will individually cost (plus margin). Rather most will be paying in much more than they will ever cost, whereas some will cost much more than they have, or ever will have, pay in. One total property loss or serious at-fault auto collision (say ~$400k) will dwarf a lifetime of premiums ($2k/year for 50 years?).

The point is that such things are rare, so most people will have zero of them over their lifetime. But even perfectly knowing the a priori chance that each person may suffer a catastrophic loss, you can't know which specific people it will be.

[username332211]

Insurance companies don't have to make money from underwriting or insurance.