[compiler-guy]

The technical term is that you must have an “insurable interest” in what you insure. Both of your examples are people protecting their insurable interest. Ownership is the most common insurable interest, but there are many other ways to have one.

This is done because the insurance company wants you to prefer that the covered event doesn’t happen, which avoids some conflicts of interest.

These prediction market events don’t have the usual insurance interests involved.

[nivertech]

Even if you have an insurable interest, moral hazard may arise - acting recklessly or other abuse, while knowing you are insured/covered. Somewhat similar to friendly fraud in retail/ecommerce.

[bluGill]

Insurance normally has fine print about those things. Life insurance doesn't pay out for suicide. Fire insurance doesn't pay out if you intentionally burn your house down (the fire department also will investigate because even though it is their job they don't like risking their life fighting fires)

You can get insurance without the above provisions, but it will cost a lot more. Once in a while someone manages to collect on a claim for loss of their expensive cigars after they smoke them - but this is rare and usually not worth the cost.

[swores]

> Life insurance doesn't pay out for suicide.

This may vary by country, it isn't a subject I'm particularly familiar with, but at least in the UK that isn't true - many, I think most, life insurance policies here do pay out for suicide. There's just a period of years between the start of the policy and when suicide starts to be covered, to prevent people who are planning on killing themselves from being able to take out insurance just before doing so.

[DaedalusII]

some life insurance policies pay out for suicide after an initial exclusion period. this is often six or twelve months. insurers can include it because suicide claims are relatively uncommon.

if there is evidence that someone took out the policy with the intention of creating a claim then the insurer may treat it as fraud and decline it.

[chollida1]

> The technical term is that you must have an “insurable interest” in what you insure.

Yep, we're in full agreement here

[sandworm101]

Unless you short the property. Essentially, sell it now on the bet that it will drop in value later. Then it burns down and you repurchase the vacant lot and return the property to the original owner.

Evil, but most everything in real estate is evil.

[emsign]

And that's exactly the problem with Polymarket and such, it gives an incentive to be destructive because that's easy. Entropy is easy.

With an insurance this trick won't work, because the insurance company will notice what you are doing. Polymarket doesn't care.

[WinstonSmith84]

> With an insurance this trick won't work, because the insurance company will notice what you are doing

This has worked well millions of times (and occasionally failed too with people ending in prison or with huge fines). Where I can agree however is that Polymarket makes that much easier.

[stressback]

I don't think any corporation "cares" about social issues, but, fwiw, polymarket isn't as ok with it as you imply. Polymarket reportedly detected the suspicious behavior, reported it, then worked with investigators to nab Gannon Ken Van Dyke.

[csomar]

Based on that logic, I can say I have a vested interest in the bet?

> This is done because the insurance company wants you to prefer that the covered event doesn’t happen

But buying the insurance cancels exactly that. Insurance fraud is a thing.

[compiler-guy]

Insurance doesn't exactly cancel that. Maybe in a theoretical world, perhaps.

For example, I have a decently-sized life-insurance policy. If buying insurance "exactly covered that", I would be indifferent to whether I lived or died. But I'm not. And I can't think of a policy-size that would make me so. Money is an imperfect substitute.

Less dramatically, I have really good auto coverage. The car itself is nothing special, and the coverage I have would make me whole (minus a very small deductible) But I am very much not indifferent to replacing the car with money, and it would take way more than the deductible to change my mind on that.

The hassle-value alone would go way over. And hassle-value is usually not insurable.

Insurance fraud is absolutely a thing--but the insurance company still wants you to prefer that the event doesn't happen. That it doesn't work perfectly doesn't really invalidate the point.