[afiodorov]

You're right, they can try to manipulate you on a thousand tiny things. My counter-argument is that at a certain point, it's not worth the mental energy to fight over what amounts to pennies on the dollar.

Anecdotally, when I bought my car recently, they forgot to even offer me the extended warranty they'd planned to push. I find it funny to think it was so minor, even they forgot to care.

[ctxc]

Tangential, but I think most extended warranties I've noticed are beneficial. Even last month I was kicking myself for forgetting to extend a 2 year warranty which costs 1/4th the one time repair cost I had to cough up.

[blincoln]

Are you sure the extended warranty would have covered it?

I paid for an extended warranty on the first car I ever bought. Turned out it didn't cover any of the things the salesperson cited as good reasons to pay for it, and to maintain the warranty, I'd have to pay the dealer for all maintenance - even oil changes.

That car never needed any repairs, but seeing the list of exclusions convinced me to never pay for an extended warranty again.

[lotsofpulp]

> but I think most extended warranties I've noticed are beneficial.

If this were true, it would result in a loss for the issuer of the warranty.

[vntok]

Interesting. Can you expand a bit on what your reasoning is so we can understand where you come from?

[lotsofpulp]

I guess I should have specified financial benefit.

You wouldn't pay someone else to insure a common vegetable, because it is so low cost that if it turned out to be bad, you would just buy another one (or have bought extra as your insurance).

When you buy from Walmart/Target/Amazon/Best Buy, they will try to sell you insurance for a $30 toaster or other cheap appliance. Again, most people will not buy this because they will believe the appliance will work sufficiently long or that the warranty process will be too time consuming, or otherwise decide that just quickly replacing the cheap appliance with another is the preferred way to insure it.

The insurance seller is a business and has to earn more than what they pay out for claims (or at least to make payroll if it is a mutual insurance company). Otherwise, they are going to lose money over time and go out of business. If you financially benefit from it, then you are either lucky, or had an information edge over the insurance underwriter.

Of course, if you get peace of mind from buying insurance, and count that as a benefit, then most insurance is beneficial in that case.

[vntok]

That is really not how the insurance seller's business model works.

Think about it this way: on a given year, they are collecting "Sales" amount of money from their pool of customers. For the insurer to make a profit, the amount reimbursed to legit claims simply has to be less than Sales-Expenses that year, which basically translates to having Z customers claims on any given year where Z << NbOfCustomers.

So it's a bit like a Ponzi scheme, whereby you can benefit as a customer if you pay year 1 and get a claim during year 1 or 2 for example, and the insurer can benefit too if many customers pay "a year in advance" (money that can be invested) before having their claims fall on years 2 or 3 (or never).

[lotsofpulp]

The customers can earn investment returns just like the insurance seller, so you have to reduce foregone returns from the insurance buyer’s benefit so it ends up canceling out.

>For the insurer to make a profit, the amount reimbursed to legit claims simply has to be less than Sales-Expenses that year, which basically translates to having Z customers claims on any given year where Z << NbOfCustomers.

That inequality does not “basically translate”. Insurance sellers have to exist for multiple years, not just 1 year.

If every single year, “customer claims” are less than the net benefit of customers, which is what I think you wrote although it is hard to interpret, then your “net benefit of customers” includes a non cash component (such as feeling secure)”.

There is never a free lunch, and the insurance business is not at all like a Ponzi scheme (that’s the whole point of actuaries performing calculations…to ensure sustainability without an ever growing income stream).

[_9ptr]

That's not how insurance works

[lotsofpulp]

I meant financially benefit. See

https://news.ycombinator.com/item?id=44490667

Insurance seller has to earn at least enough for payroll, so at least some of the premiums go towards that instead of any money received from claims.

Investment earnings cancel out because both the insurance buyer and insurance seller have access to same returns via broad market index funds. I.e. you can self insure and get the same returns on your savings that the insurance seller is going to get if you gave them a premium.

[alganet]

> it's not worth the mental energy to fight over what amounts to pennies

Maybe it's not about the money. Maybe I see it challenging profiling algorithms as entertainment.