[dataflow]

> The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition.

This doesn't pass the smell test, though. The premium would take care of that. You've told them you have a pillow, and that you want it insured for $1M. They could easily look at it and go "hm, this is worth $10", and give you a absurd premium of $999,900 in exchange for your absurd valuation. So happy accidents won't be worth it anymore. What's wrong with just letting the premium take care of it?

[js8]

You have simply rephrased the actuarial rule "don't insure item for more than its actual value". The "premium" you describe just inflated the value of the item.

[dataflow]

I don't see how this answers my question.

[smallnamespace]

> What's wrong with just letting the premium take care of it?

Offering a deal that nobody honest would take is a waste of time for everyone involved.

[hansvm]

Walking back from the pillow analogy a bit, I'd happily pay for homeowner's insurance that also covered lost wages, a temporary rental place, legal fees, and the other incidentals likely to arise in a fire or flood (as opposed to paying whatever high deductible I'm comfortable with on top of those other large, unknown costs). Adding those to the policy would necessarily go beyond the home value. Is that level of excess allowed?

[dataflow]

> Offering a deal that nobody honest would take is a waste of time for everyone involved.

I'm not suggesting any insurer should be forced to offer a deal. They're welcome to just shrug and tell you to pound sand. What I don't see is the logic behind having an international code prohibiting the offering of such deals. Is the international code trying to dictate to the insurance company what is worth their time?

[smallnamespace]

The international code is also defining the key distinguishing factor of insurance: it makes the insured whole against a risk that they actually have.

There are ways to bet on things where you don’t have that underlying risk: gambling, derivatives markets, prediction markets, etc.

These aren’t insurance and aren’t regulated as such.

[rocqua]

The premium would be 1M. Maybe .99M if they have reason to assume not everyone will be fraudulent.

[dataflow]

Sure, whatever. The exact value of the premium has no bearing on the point I'm trying to make.