[cossatot]

No, because the amount of money you have in a bank account accumulates linearly, so you can only pay up to what you have put in. With insurance, you can get a payout more than what you have contributed up to that point, which is necessary for covering catastrophic damages.

[StackRanker3000]

But in this hypothetical the insurance company has perfect information, so they won’t sell you that policy that has to be paid out for more than you’ve contributed.

It’s just a thought experiment, but the more information they have on us, the more relevant it becomes.

[ses1984]

They can’t predict the future, they can’t predict exactly when you’ll get in an accident.

Perfect information means they know your risk level to the best possible accuracy, which would really only apply to populations.

Perfect information means they insure 1000 people and predict they’ll have one bad accident per year. After ten years they covered for ten accidents. All ten could have occurred in the first year and they would still be correct.

[StackRanker3000]

> They can’t predict the future, they can’t predict exactly when you’ll get in an accident.

That’s why it’s a thought experiment, and not real life.

> Perfect information means…

No, that’s not what was meant by perfect information in this instance.

[ses1984]

Then it’s a boring thought experiment. It hardly deserves the name “experiment”.

[StackRanker3000]

Sure. I can’t speak for Scoundreller, but I don’t think it was meant to be particularly interesting, just pointing out to wbl that if insurance was to become perfectly fair, it will also have become pointless.

[ses1984]

There’s a pretty big leap between perfectly fair and having perfect knowledge of the future. You can know that a fair coin gives exactly 50% chance to flip heads or tails without knowing what the outcome of the flip is going to be.

[drawkward]

With interest, the growth is superlinear