[AnthonyMouse]

If there is such an asymmetry in bargaining power then why do most people pay less than the statutory maximum? If there are multiple insurance companies, how is it not the consumer who has the bargaining power, since they can just take the lowest price?

The actual reason is that some consumers are extremely high risk, the market rate for those consumers is correspondingly extreme, and then they whine to legislators that they're getting ripped off when in fact the rate reflects the risk. And then the company either refuses their business if they're allowed to or raises rates on everybody else to compensate if they're not.

[lazide]

Eh, or without regulation when people switch risk categories due to a loss they get completely screwed because no company will insure them anymore. At which point, there is strong incentive to only claim the most outrageously bad losses, and for people to only actually get insurance if they have real reason to suspect a loss that is non obvious to others.

It’s a market type that is fundamentally messy and prone to abusive behavior by both sides.

[AnthonyMouse]

> Eh, or without regulation when people switch risk categories due to a loss they get completely screwed because no company will insure them anymore.

This only happens when regulations cap premiums, because otherwise there is always a rate at which selling insurance is profitable. Even if you have a 50% risk of a claim (extremely high), you'd still be able to buy $100,000 in insurance for a little over $50,000. Of course, you may not be able to afford this, but then maybe if your risk is that high you should just refrain from engaging in that activity eh?

> At which point, there is strong incentive to only claim the most outrageously bad losses

That's what insurance is for. If you have a 20% chance of losing $100 every year, you don't need to pay $21/year for an insurance policy, you just lose $100 once every five years.

> and for people to only actually get insurance if they have real reason to suspect a loss that is non obvious to others.

The reason to get insurance is if there is a low probability high cost risk, like a house fire. You don't expect it to happen, but it could, and you'd rather pay $1000/year, have it and not need it, than lose the value of your house in the event of a random accident.

[lazide]

Hard to ‘refrain’ from buying health insurance in the middle of cancer treatment eh?

Or ‘refrain’ from buying house insurance because someone tripped in your house and is suing you for $1M worth of damages, or you discovered your house was built in a high risk fire zone.

Or ‘refrain’ from buying vehicle insurance after an accident because the state will not let you drive without valid insurance.

That’s the whole point.

Because for normal humans, there is no difference between ‘insurance won’t be issued’ and premiums shooting up from $100/mo to $90k/mo. especially when the policy renewal period is in the middle of whatever is going on. Like trying to live. And if insurance companies didn’t have caps on premiums, that’s what they’d do - or just cancel it to avoid even worse PR.

At least ‘pre existing conditions’ aren’t automatically a death sentence when trying to switch insurance anymore eh?

[AnthonyMouse]

> Hard to ‘refrain’ from buying health insurance in the middle of cancer treatment eh?

The thing you're insuring against in this case is a cancer diagnosis. If you're insured when that happens, the insurance company should now be on the hook for your lifetime worth of cancer treatment regardless of whether you pay them any more premiums. That isn't how we implement it, the existing regulations don't work like that, but that's how it would work if what you were buying was actually insurance. The insurer eats the cost at the point when the unknown risk becomes known.

> Or ‘refrain’ from buying house insurance because someone tripped in your house and is suing you for $1M worth of damages

You don't have to buy liability insurance if you own your house. Of course, then if your negligence injures someone they're going to get the house instead of the insurance company's money, but that's up to you. And can be avoided in either event by not giving people valid legal claims against you.

Notice that a single claim is generally not enough to make insurance unaffordable, and multiple large valid claims is generally a sign that you're doing something wrong.

> or you discovered your house was built in a high risk fire zone.

It's not the insurance company's fault that you bought a house without checking what it would cost to insure. The cost of insuring houses there is supposed to be high, to deter people from building them there.

> Or ‘refrain’ from buying vehicle insurance after an accident because the state will not let you drive without valid insurance.

So you take the bus or move to a walkable neighborhood. What's your alternative, that someone can total two new cars every week and still get insurance for the same rates as anyone else?

> Because for normal humans, there is no difference between ‘insurance won’t be issued’ and premiums shooting up from $100/mo to $90k/mo.

But why should an insurance company be required to insure you at all? "Known arsonists can't get/afford fire insurance" is fine. "People who get into a major car accident every week can't get/afford car insurance" is fine.

> especially when the policy renewal period is in the middle of whatever is going on.

That's not how insurance works. You buy insurance, then something happens, then you file a claim. They can't retroactively raise your premiums, they can only raise the future ones because there is now evidence that your risk is higher, and then you get to decide if continuing to carry insurance is worth it, and you still get the money from the claim that happened while you were insured. Then you can either choose to pay the higher rates, go uninsured going forward or stop doing the thing you need insurance coverage for.

> At least ‘pre existing conditions’ aren’t automatically a death sentence when trying to switch insurance anymore eh?

This has a similar effect to putting the full lifetime cost on the insurance company you had when you got diagnosed, except that you can then change insurance companies. Which is weird and has perverse incentives, like there is no reason to carry good insurance against long-term cancer treatment until after you find out you have cancer. Which makes the good insurance much more expensive because buyers would self-select and only people who know they have cancer would buy it.

Then we try to avoid that by tying health insurance to employment which makes it harder for people to switch when they get a diagnosis, and that in turn has a ton of other negative effects because now there is much less competitive pressure in the health insurance market.

Regulators seem to really suck at thinking through the consequences of what they're doing. Or they don't and someone is getting paid to do it this way on purpose.

[lazide]

You can’t get a mortgage without house insurance.

Things like fire danger risk tend to change after the home is built as new data comes in.

Health insurance isn’t implemented that way, as you acknowledge, exposing folks to exactly that risk.

You seem to be stuck in theoretical. I’m talking about actual behaviors.

[AnthonyMouse]

> You can’t get a mortgage without house insurance.

You don't have to get a mortgage to live. You can save up and pay cash, or you can rent. Or you can pay the higher premiums that reflect your actual risk.

> Things like fire danger risk tend to change after the home is built as new data comes in.

In which case this is a different class of insurance that you could buy if you wanted it. You wouldn't be insuring against fire, you'd be insuring against the risk of your property value going down to reflect higher fire insurance premiums if the fire risk goes up. But why should you be forced to buy that type of insurance if you don't want it, or have it priced into everyone else's fire insurance premiums?

And regardless of that, why should someone who buys their house after the fire risk is known to be high be subsidized by everyone else?

> Health insurance isn’t implemented that way, as you acknowledge, exposing folks to exactly that risk.

It isn't implemented that way because of regulations, but the issue is what kind of regulations there should be. The existing regulations are extremely inefficient -- Americans pay more for healthcare/insurance than any other country, regardless of whether the other country has a public or private healthcare system.