Even if you don’t have a mortgage, your home is probably worth several times your annual salary. Most people can’t afford that loss if it burns down, gets hit by a tornado etc…
A huge number of Americans have no retirement savings at all [1]. For some of these people who do own a house, selling it at retirement is the only way they can avoid poverty (or at least maintain their quality of life), especially with the possibility of a future government significantly cutting Social Security benefits.
Even those with retirement savings often treat their houses as an asset to be leveraged or sold at retirement to help fund the latter stages of their lives [2].
These are all good reasons to carry property insurance even if you don't have a mortgage on the property that requires it.
1. https://www.cbsnews.com/news/retirement-baby-boomers-with-no...
2. https://www.axios.com/2023/03/11/how-americans-are-using-the...
I don't remember my house insurance (or medical, or any other kind really) being this detailed. I just picked rough estimates for the value of my structure and the items inside, and that was about it? There might have also been a waiver about not doing any hazardous activities like open fires or storing chemicals on the property.
It definitely wasn't this detailed.
Trampolines can indeed cause accidents but is that big of a risk to have one? That feels so out of place it's beyond comical.
https://www.mayoclinic.org/medical-professionals/pediatrics/...
Trampoline installed well (i.e. staked down) with proper netting = who cares
Trampoline unsecured, no net = wind risk, personal injury risk, death risk
I predict that they are preparing substantial layoffs; thats the only thing that even begins to explain this situation. out with the old, in with the drones
> The red-flagged images are providing insurers with ammunition for nonrenewal notices nationwide.
I don't think your comment is wrong, but it's not representative of the problem the article is bringing up.
I think they should have to give people time to fix the problem before dropping them.
A neighbor literally just got a letter in the mail, "We think your trees are over your roof. Policy cancelled immediately." (The tree was over his daughter's playhouse in the back yard, the algorithm saw shingles obstructed by a tree branch and flagged it. They don't even bother with human review.)
There should be a warning period, "Hey we saw this, and if you don't fix it in 90 days we'll have to drop you." They certainly take money before doing an inspection... they're happy to have you start paying them right away as soon as you move in. Anyway there should be a time period for cut off of service.
Insurance companies are free to do inspections, but there's still the stress that getting a notice like that does to someone.
These days, who even reads letters from insurance companies in the mail?! I mean, I just chuck anything with a logo in the recycling.
And, from what I can tell, the insurance company dropped my neighbor when they sent the letter... so he didn't even know he wasn't insured until he got the letter.
Anyway... these companies aren't your friends. They're all out to screw you.
USAA screwed me over bad recently, to the tune of nearly $300k... they forced me to use their contractor (or we won't cover your temp housing), said not to worry and promised me a "5 year workmanship warranty" on the work done by their contractor... but when the contractor was utter shit, they put me through their mediation, where their mediator said, "Yeah all this work done by the contractor is junk, it all has to be re-done... if they don't fix it, we'll eat their lunch!" but ultimately they didn't enforcing any of that with the contractor and let the contractor off without any consequences -- even insisted I pay the contractor. "Oh you had no right to expect the work would be professionally done..." the contractor said in court. It was all total BS. And they said, "USAA may promise you one thing, but contract we have means we aren't liable for any damages to your house, 35-foot trees we killed, foundations we cracked, garage doors we backed into, things our endless stream of disorganized day-laborers stole, etc..." USAA's mediation process was really just a play to run out the statue of limitations on the contract too, I felt. =P
Live and learn... but insurance companies are heartless bastards. You can't trust them, and even the "good" ones will screw you if they can. Tell you one thing, and do another...
If you have a flood, call your lawyer first, the insurance company second, and the water mitigation folks third. Get it all in writing, take more photos than you ever thought necessary, and hope you have an adjuster who isn't having a crappy day that day.
If you've been paying for insurance for 20 years with one company, then I'd say that is certainly a dick move to drop you right before it might pay out. What even is the point then?
If you don't own your house outright, the bank that owns part of it may require insurance as a prerequisite for loaning you money.
I've long said that one major threat that "regular people" would suffer from the consumer surveillance industry was going to be insurance (another being fine-grained price discrimination). It looks like both are really starting to come into swing. The best time for US privacy legislation (including something analogous to the GDPR) was 20 years ago, the second best time is now.
1. What pisses me off more than anything else, it enables fraud that otherwise wouldn't exist. People manufacturing calamities and then claiming insurance allows dishonest people to get ahead in life over people who are honest and concerned enough about the future to buy insurance. Additionally, insurance fraud is net bad relative to other types of fraud because it encourages criminals to manufacture damage that wouldn't otherwise happen.
2. There is an obvious incentive for them to chase an endgame of knowing exactly whether you will cost them money or make them money. When they attain this, insurance simply becomes a fortune teller and an instruction manual for Living Without Calamity. If you're denied coverage, you're going to experience something calamitous. If you're accepted, you have the ability to be fine and don't need insurance, unless you aren't sure how to Live Without Calamity. When you are accepted, you're only covered if you surrender your agency and follow their instructions for Living Without Calamity. Basic things like travelers insurance have clauses that void your policy if you scuba dive past 30 feet on your trip.
3. Insurance policies can create toxic incentives for people that hurt society. I filed a claim with Generali travel insurance because my host tested positive for COVID with a take home test, and I canceled my trip. Their web portal indicated that my claim had been received and was awaiting processing. I called incessantly to confirm my claim was good, and was not able to get an answer after several calls that routed through incompetent-by-design help desk employees and into a voicemailbox of a claims processor. Weeks go by and I receive a voicemail from the person I had been trying to contact telling me that I needed a doctor's note confirming that the person had COVID, and a take home test would not suffice. So, a company allegedly tasked with helping the public live safely wanted me to, at the time, ask my COVID infected host to waltz in to the doctor's office and spread around a pathogen that could kill patients. Nice. I guess they weren't medical insurance so they didn't care. And of course no doctor would retroactively go back in time and confirm that a person was positive for a sickness after they had already recovered.
Insurance feels like the biggest scam in the history of the world. You are legally obligated to pay us for nothing, most of the time.
Not even insurance - this was the city of Newport on a power rampage. Turns out there’s also no shortage of general corruption in the police department…
https://bringmethenews.com/minnesota-news/footage-shows-newp...
If anything, overzealous adherence to the letter of the law, while annoying, seems the exact opposite of "corruption."
Rules are rules.
Perfectly accurate insurance pricing would be for each policy to cost exactly the amount of covered losses in the period covered plus the overhead of managing the insurance, which obviously would be pointless.
There's no pooling of risk at all.
Insurance has always been a negative-EV trade for the average person, but there have been mispricings that make it positive-EV when you have more information than the insurance company. However, the inefficiency meant that you also had to pay for the uncertainty on their estimate of your risk.
With less uncertainty, the spread in the market should go down, and your premium should converge to something close to your actual risk plus the cost to assess your risk.
Negative EV in terms of dollars, but not necessarily utility. For most people, a 1% chance of losing their $500k home is worse than paying a $5100 premium.
“All I want to know is where I’m going to die, so I’ll never go there.” - Charles Munger
But we don’t actually know the future that well, so even if we know that some houses are riskier than others, it’s still worth buying.
https://www.nytimes.com/2024/03/11/technology/carmakers-driv...
My opinion is that the opt-in hardware might have afforded you some discount, maybe. I doubt the same is true for the manufacturer-insurer relationship. I think that pattern is probably more likely to establish a higher baseline for all drivers, and the presence of data can only ever (1) maintain the baseline or (2) harm you.
Insurance will jack up the renewal rates for everyone because there are increased number of accidents in your zip code or area. Cars are more expensive now. Often adjusters just declare vehicles no longer worth the repair. Some vehicles if they get dented will result in a shit ton of work to get it repaired (ie, Rivian truck).
You are paying for the insurance companies increased risk because the people around you can’t drive worth shit.
Got to love car centric transportation …
Insurance companies are supposed to be creating risk pools. If everyone in my zip code drives like shit the insurance company should be splitting them up into pools with better drivers from other areas. There's no reason at all to pool everyone geographically. If the insurance company can't manage risk pools they're fucking up.
I see an exciting new revenue stream in their future.
That may only be part of it, but it's definitely part of it.
I have no idea how that would play out but it seems like an interesting strategy to take.
So the price to defend against fraud--which, related to my point #1, is prevalent enough such that Generali has this policy--is to ask infected people to spread their sickness in doctors offices just so they can use doctors as tools to verify claims are legitimate.
So yes, I should have read the policy, but I would not have asked my host to go into the doctor's office and spread COVID around just so I could get my legitimate claim processed. I just wouldn't have bought the policy in the first place.
No. That is done over the phone or video chat. Not required to physically attend a doctors appointment in order to obtain a doctors note for COVID infection. It's called telemedicine or virtual consultation.
"The Sickness, Injury or death of you, your Family Member, your Traveling Companion or your Service Animal. The Sickness or Injury must first commence while your coverage is in effect under the Policy, must require the in-person treatment by a Physician, and must be so disabling in the written opinion of a Physician as to prevent you from taking your Trip (either because your condition prevents your travel, or because your Family Member, Traveling Companion or your Service Animal requires your care);"
That’s exactly what they do. There are people getting paid millions of dollars to create software that does this.
Do you know how much money an insurance company can print if they can undercut the competition by selling a bunch of policies to people who won’t file a claim?
People pick insurance based on price, and if someone is selling you a cheaper policy because they know your roof is better, you’re going to buy it from them.
They win because you’ll pay a premium without filing a claim, and you win because you can have a cheaper policy. That’s how it works in the real world.
The point of them trying to quantify risk as accurately as possible is to be able to extract profit while also offering competitive rates.
It's the same as with any other company. They try and operate as efficiently as possible (ie. reduce costs) to try and make more profit, while competing on price.
That’s not an option in many cases. The first homeowner featured in the article is in rural Northern California. CA’s insurance regulator has been extremely restrictive about letting insurers raise rates, especially in that area, so her insurance premium was probably a fraction of the expected cost of insurance claims.
If bargaining power is asymmetric between the insurer and the buyer, then the extra information is used for additional price discrimination (eg. Its better for you if the picture is never taken regardless who you are).
So the question is: does the insurer or the insured have the bargaining power here? Competition helps, but is only one part of it.
Seeing that insurers seem very profitable in the US, a decent proxy for bargaining power, I'd argue this is a bad thing for the consumer.
That's exactly backwards. If you have better information than a competitor, you have an effective strategy to steal their lower-risk customers and still make a ton of money.
This absolutely will happen. And the rates for the higher-risk customers they are left with will absolutely go up.
And of course it's a practical requirement for anyone whose net worth is primarily in their home.
There's a few obvious exceptions, but plenty of insurance isn't required.
You're required to get homeowner's insurance if you have a mortgage, and you're required to have car insurance if you want to drive a car on public roads.
So the majority of Americans are forced to purchase at least one of these in order to live their normal lives, which makes demand inelastic.
It’s mostly your own governments fault if you can’t find a cheap policy, there are millions of people who will probably never have to file an insurance claim in their life making up for government decisions to insure people who wouldn’t normally be able to be insured because of poor decision making skills.
But that doesn't imply what you're saying unless the supplier has monopoly power, which they, by law, do not.
Say you buy a $800k prop but $400k is land value. Layer it is $1.6m of which $1m is land value. They can huff and puff and blow your uninsured house down, and you now have a $1m development lot.
Now clearly it is better to be insured, but insurance doesn’t always come through so this is a hedge.
tldr; location cubed
This way individuals can correct their dangerous behaviour immediately, rather than accidentally accumulating a large fine.
In the end, this is going to happen. Insurance companies will be soothsayers and get paid for essentially making advisory predictions, not offloading risk, while society will have to agree to bear the cost of known outcomes over which people generally have no individual agency.
Sure, but neither of those are due to it being required by law.
In the first case there I don't know what's happening, I guess maybe insurance companies have figured out that people dropping insurance and then picking it back up correlates with increased claims due to stuff that happened during the interim.
In the second case there, you can definitely get liability insurance separately from homeowners. And it's wayyyy cheaper. Or, live in a country that isn't as crazy litigious as e.g. USA.
But again, neither is a legal requirement, which is all I was getting at initially given the top comment in this chain.
But back to the topic - a total catastrophic structure loss would indeed be a problem. But from what I've seen, most insurance claims are not for total losses but rather things like water leaks and roof damage that have much higher sticker prices than what it actually costs to maintain/triage/mitigate/calmly repair. I've known people that have submitted claims for ice dams, oil burner blowbacks, new roofs ("wind damage"), finished basement water damage, etc. I will never submit an insurance claim for those type of things, and so it makes sense to at least consider self insuring, especially when rates are doubling every few years.
There's no way to moralize out of this!
Regarding minor claims: I think what I've learned about homeowners insurance is: don't make minor claims. That's not what the product is for. Homeowners insurance (1) protects you from total loss of your primary asset (ie, from fire) and (2) protects you from being bankrupted by lawsuits. If you use it to repair leaks, you're going to take a bath.
Have you applied for a homeowners policy recently? Literally one of the first questions insurers ask is: "have you made homeowners insurance claims?".
When you buy insurance, you aren't just pooling risk with other customers with the exact same risk profile as yourself. You're pooling with all customers of the company. (Plus all customers of any reinsurance company, etc.)
Put another way, if the insurance company isn't taking on any risk then you are.
Obviously with something like medical insurance, where people often carry risks that are no fault of their own, there are downsides.
The tortable aspect (compensation for causing personal injury) must also be covered.
In my part of Europe, if someone breaks something while making normal use of your trampoline that would be considered an accident. You would only be liable if you had grossly neglected maintenance on the thing, knew that (or would reasonably be expected to know that), and they can prove that this has caused the injury.
Personally my gripe is that I wish insurance companies would update what are seemingly quite obtuse pricing models, rather than pushing customers into invasive surveillance tech. For example I'd appreciate if it were possible to raise my deductibles by an order of magnitude and see a meaningful drop in premiums. But instead it seems like the only coverage knob that has an effect is the max coverage limit (which when you think about it, actually shouldn't even be a thing. the whole point of insurance is to cover the long tail risk). My gripe is a little more pronounced for auto, where I quoted out dropping the miles driven on one vehicle to nearly zero and it reduced premium by a mere 10%.
Re minor claims, maybe I'm underestimating how much future premiums went up after those somewhat frivolous homeowners claims I mentioned, and they effectively just ended up forming loans rather than affecting the overall expected value of losses.
Also, the only thing stopping medical insurers from denying coverage or increasing prices for people with pre-existing conditions is the Affordable Care Act.
You can get insurance on very risky things. The way it's done is high rates and "reinsurance" which means the insurance company shares the risk (and premium) with a pool of other insurance companies. For policies with a large possible payout (e.g. a big ship or aircraft) this is always done, to avoid issues for the insurance company that gets unlucky enough to have to pay out.
A pre-existing condition is not a low probability event. It is a 100% certainty that you have to pay for it. In that case the insurance is just a middleman who is increasing the cost of the thing you definitely have to pay for. You pay the insurance company, they take a cut, and they pay the healthcare provider. Why not just pay the healthcare provider directly?
Second of all: when you take out an insurance policy and pay your first premium, you are immediately covered. If you are "self insuring" by setting aside the same amount monthly, it will take you a long time to even begin to accumulate enough funds to cover yourself in case of catastrophe. (And due to the first point, you may never reach that point.)
Finally, yes, of course, there is no need to take out an insurance policy for a risk that you can afford to pay out-of-pocket. It's like how if you have the cash to pay for a house, there is no need to take out a mortgage.
No, if the expense were that predictable, the best case would be dispense with insurance entirely, since it effects the cost not at all and imposes overhead, especially insurance where the rates are accurately computed over short periods.
Without uncertainty, there is no point in insurance.
1. If you choose not to take out an insurance policy, and instead save the money yourself, you will not have the lump sum immediately available to cover catastrophe. Whereas as soon as you start paying insurance premiums you are covered.
2. The payout you receive when you make an insurance claim does not just come from the premiums you have personally paid. In fact, for a rare event, the size of the payout likely exceed the total cost of all premiums you could pay over your entire lifetime. This is because the risk is pooled over all customers, and not all customers will make claims.
Neither of the above 2 points become any less relevant as the insurance premiums become more and more accurately priced.
What I'd expect is that you pay into the pool and then after 20 years you've more than paid for the new roof and so you get a new roof.
It should be slightly stochastic financing of your new roof and since a roof has a finite lifetime there should be a new roof at the end of it. It shouldn't be "hey, looks like your roof is about to have issues now, and we only insure new roofs, thanks for the profits, byeeeeee...."
If your roof has a finite lifetime and is approaching the end of its life, the cost of insuring your roof will be close to the cost of a new roof. If your insurance company is not allowed to increase your rate to match your risk (which seems to be the case in California), they will drop you as a customer.
Your previous premium payments insured against the risk of unexpected loss during those earlier policy periods only. They have nothing to do with your current insurance rate.
https://www.iii.org/press-release/triple-i-extreme-fraud-and...
"Florida, however, is the site of 79 percent of all homeowners insurance lawsuits over claims filed nationwide while Florida’s insurers receive only 9 percent of all U.S. homeowners insurance claims, according to the Florida governor’s Office."
You assumed my views without asking.
My comment only referred to there still being a benefit in choosing to have insurance even with perfect information about risk and expected benefits. At no point did I even imply that I thought "it's irresponsible to own anything".
If insurance can accurately predict losses that will occur and price accordingly, you are paying exactly the same amount plus overhead, on a similar schedule for insurance as directly paying for losses yourself without insurance.
The cost spreading effect (both over time and over individuals) is a direct consequence of the inability to accurately predict losses and the resulting inability to price accurately.
The hypothetical that I'm working with is that the insurer can perfectly price insurance by perfectly estimating the _risk_ or _expected loss_ for each individual customer. They can then pool this risk, take a profit, and everyone wins.
This is what I assumed you meant by "perfectly priced insurance". But I've realized you're talking about the case where insurer has perfect knowledge of the future losses each individual will take. I agree in this case insurance will not make sense. Insurance would be free for most individuals and impossibly expensive for those doomed to catastrophe. (The latter group would be screwed, even if they shared perfect knowledge of the future with the insurer.)
So is mine. But my premise is that the true risk (that is, what uncertainty cannot be eliminated with sufficient information about the current state physical universe) is small, most of the apparent risk is just insufficient current data or an insufficient model; things like the drone data gathering are an attempt to narrow the first problem, and the second will improve over time with scientific progress.
As those improve, the expected loss converges toward the actual loss (and does so at any given proximity on progressively shorter timelines.)
To the extent that the information is accurate, I agree. If you make an agreement with a company and buy insurance based on your statement that you don't have a pool, but then you do have a pool, I don't see any reason why we should be upset that you didn't get away with lying to the insurance company.
I pointed them to my address on Google Maps which has my correct location, but they said their system isn't wrong and the address coordinate mapping can't be changed anyway. Go away.
Then another insurance company told me the same thing. I thought maybe I was going to be uninsurable completely based off of a computer error.
Luckily, Lemonade has smarter systems and got my location right, so I was able to get insured with them. But I'm not sure what I would do without lemonade.
(The article and other things I'm reading suggest that cancellations are because footage finds trampolines and pools --- in which case I don't even understand how anybody can have sympathy. It's fine to have insurance risks on your property! But disclose them!)
False positive with similar circumstances would be a nightmare.
This is part of the risk one takes buying property. It’s more than offset by the benefits of buying property. Or else everyone wouldn’t be telling me what an idiot I am for renting.
They can decide not to renew for any reason - including that they just decided not to do house insurance at all anymore.
> if their insurance is cancelled based on inaccurate information
In all highly advanced countries (G7 and similar), insurance is insanely strictly regulated. If they cancel your policy for a b/s reason, and your protests are ignored, then tell the regulators. They will fix it quickly and slap a huge fine on the insurer.
If insurance companies can cheaply inspect everyone’s house from space, the end result will be to lower prices for people with homes in perfect condition and raise them for everyone else.
This is potentially problematic because the people with houses in poor condition are the least able to afford added costs in general.
I'll note that there's nothing at all redistributive about sneaking a trampoline onto your property, too.
Further, I'll note that working class people also take pride in their houses and pay to keep them up, and they too are being asked to subsidize people who are getting rate breaks from false assessments.
Later
My municipality will make an interest-free loan of up to $25,000 to cover the kinds of property repairs we're discussing, if you're income-qualified (ie: not too rich to just pay to replace your own roof).
If the goal is redistribution, then using accurate risk data as a starting point seems preferable.
Nobody will see lower prices. Perhaps these perfect homes might see slightly smaller increases year to year.
> houses in poor condition
The point of the thread is that they're dropping people for random noise in satellite photos. The house might be perfect, it's just the photo that's wrong. But they don't care.
I'm not that optimistic.
Insurance companies are very keen to get as much risk as possible off their books before the climate gets even more extreme in its volatility
Good goes with bad, so long as the bad goes, some good going too is undesirable but OK because they are aware if the catastrophic climate events looming
The insurance companies are behaving logically, probably legally IANAL, but for people who are simply caught in the wash it is unfair
This is part of the huge systematic disruptions we are all going to have to adapt to, or die from, due to climate change
Worrying times
Why shouldn't I want them to be running drones over our houses? Worrying times... for pirate trampolines!
Also, what is the aerial photo of a roof going to indicate in terms of “cataclysmic climate events looming”?
Also is it a coincidence or a pun that your name is worik and it is common for you to sign your posts with something about worrying?
Yes climate change has caused an upheaval in some geographical regions.
But there are many economic forces at play, from the treatment of real estate as an investment making every home a million dollars to insurers all being reinsured by a ever smaller pool of reinsurers.
I suppose you could offer an explanation for the satellite photo, but in that case you’ve already been dropped, so getting your policy reinstated is going to be a much bigger lift.
Sure, an undeclared pool is a problem. However, the insurance company should have to put the pictures into evidence and allow a legal rebuttal. Bureaucracies get things incorrect like "wrong address" all the time. People need the right to challenge these behemoths.
We've been through this once already in the US--it was called "rescission" in healthcare until the ACA made it moot by requiring coverage of preexisting conditions. It's a bad thing and invariably needs to be made illegal.
Your friend brings over a trampoline for Timmy's birthday party, you can take the risk of injury with no intent to claim on insurance. You can remove it before inspection.
Now you get pinged out of the blue by a satellite.
Adults don't need constant supervision. Should you believe they do, why not leave a multi-camera drone above your suburb and every insured house can be monitored for infractions 24/7.
There is no reason for the insurance company to withhold the image as evidence of a problem. Google Maps knows where my trampolines are, why is the insurance company hiding their cards?
An insurance company that surveils you 24/7 and makes sure you comply, is not covering any risk, it's a protection racket.
Yes, if they do a scheduled inspection, it is easier to defraud them.
If my insurance goes up, and it has, because of people defrauding insurance companies then I would fully expect my insurer to protect their bottom line and my rates by dropping those customers playing unfairly.
What I don't agree with is insurance companies punting the decision making process to an algorithm. At that rate we end up with Google "support" from a company that, as paying customers, we should be able to have a conversation with.
The last thing I'll mention is that it goes a long way to know your insurance broker. As an example I've known mine for the last ~15 years and they have helped remediate a number of, what I'll describe as standard process issues, when I've contacted them and in a few cases even proactively.
“What’s the big deal the data is already available, relax”. On top of that, it comes with an air of condescension as if no one had ever thought about that before.
One concern with things like this is that it’s different when you have to send someone out to inspect a home vs inspecting thousands of homes at a time. Once you have data in that volume, you can start to infer things that do borderline encroach on privacy.
What is the case here, and it might be what you were trying to point out, is that this kind of data is already collected regularly and is by the books legal. The concern here is simply at the application.
At this point the cats out of the bag and the best we can hope for is at least some level of protection through legislation.
> The strategic alliance allows customers seamless and integrated access to EagleView technology within Verisk’s Xactware platform
Xactware is a product that customers (read: insurance companies) use to figure out how much money to pay on a claim.
The whole idea is to speed up the claims process. Insurance agents don't need to go out to people's houses to examine roof damage. But we also had a department doing some pretty sophisticated stuff around preventing claims fraud, so I'm not surprised.
1: https://www.verisk.com/company/newsroom/verisk-and-eagleview...
Verisk makes the process notoriously difficult compared to other companies, you have to start an "ethics" report in their ticketing system
https://secure.ethicspoint.com/domain/media/en/gui/69464/ind...
The one thing in the back of my mind is also that there’s a risk of this backfiring over time. When you are unknown to potential creditors, employers, etc in whatever platforms they choose to use to look you up, that’s the ultimate sign of risk.
Can you share how to go about it? Do you have a blog post?
It amazes me that people in the US would even consider installing a roof that would only last 20 years.
In the UK, you wouldn't consider reroofing anything that your grandparents remember being installed. Ie. Stuff doesn't get reroofed till it's 100 years old. Even then, you'll normally inspect and only replace the damaged bits.
My 350 year old house still has part of its original roof and slate tiles etc.
I'm sure healthcare insurance companies are inspired by the actions of the home insurance companies. "you declared you never smoked but our drone footage shows you and a plume of smoke in the same area. The AI detected it as cigarette smoke. Your coverage is cancelled and this is our final decision. "
The subject property, by the way: https://www.google.com/maps/place/2350+Buttes+View+Ln,+Aubur...
Those in Auburn are, by the same idea, subsidizing windows that get smashed when parking downtown, or even if you walk, the extra risk that you are hurt by someone while walking in a place with more crime per square mile.
You can live far away from a downtown and have to get your car smogged, because we wanted cars in the cities to provide for clean air.
I don’t mean we need to accept all risk in society, but for me there’s a very worrying trend against ANY risk/cost that doesn’t directly benefit the person advocating against it.
Ultimately I know it comes back to the current economic situation, because if everyone feels like they’re struggling there’s less thought to care for others.
>"It could get interesting from a privacy standpoint as... a property could be monitored daily at high resolution," he said. "It is a bit Orwellian."
https://cc.bingj.com/cache.aspx?d=1812931943850&w=GaxRXZW2Vc...
This is often approached through the lens of consumer protection. As a result, making thing flexible to allow insurance companies to say "Hey, you really need a new roof, but if you choose not to here's the price of that risk" is not prioritized. Approving rate increases is.
We are literally going to be monitored from the sky by AI for a lot of things, and from a legal standpoint at this stage there is nothing to stop anyone from doing it.
If that doesn't work, there are tutorials on YouTube for building guided anti aircraft missiles.
My bet is aerial images are just one way of many that they’re dropping customers.
When I worked at Google I knew a developer who was building a prototype service similar to Google Flights, except for auto and home insurance. I don't think that product ever shipped.
The dev on that team told me that a key thing they learned while doing the analysis is that the optimal strategy with auto and home insurance is to automatically switch providers whenever it's time to renew.
It could be because your current company has collected things about you that they aren't allowed to share with other insurance companies.
The product the OP is talking about made quite a buzz in the business when it was first released (I do think it came out for a while). It was a price comparison tool, and the reason it failed was because it was hard to get the big brand names on board. The big brand names didn’t want to compete on price alone, because they spent so much money on their brand. They already had a ton of customers coming straight to their website.
Sorry for any formatting or spelling issues here, I’m using voice to text.
- What companies the customer quotes - What amounts they are offered
You should always quote competitors because stuff changes and there are sign-on discounts offered as well.
Is there not an equivalent in the USA?
https://news.ycombinator.com/item?id=36268907 ("French tax officials use AI to spot 20k undeclared pools (2022)", 166 comments)
I know insurance brokers who have revisited a clients renewal, because Google Maps and/or the council's GIS photography shows activity or buildings counter to the client declarations. Is it a final decision? No. It's used to prompt the client to review their coverage and amend their submitted documents. Sometimes, those amendments mean the brokers are no longer able to get coverage, and the clients go somewhere else.
I'm an infra guy by trade and really enjoyed learning about the tech while on their team. Mind blowing stuff to me!!
Some officials are elected and some are appointed which all depends on the state. Appointed officials are usually more reasonable and elected are not because higher rates = mad voters = re-election chances lower.
For a long time, insurers have struggled to get sufficient rate changes approved. A literal quote for you during Covid was, “Son, I’m looking out my window at downtown {city} and I don’t see many cars on the road. We won’t approve the rate increases.”
This was with actual data of losses increasing due to supply chain disruption of auto parts, labor increases and many more things.
We basically had to write policies and hope for the best despite knowing the data / trend lines forecasting major losses.
Fast-forward and what do you have - major losses by all of these companies - and so these companies have two choices: - Try to get rate approvals - Exit the market or line of insurance
For California, the latter is the better option because at least for auto you cannot use credit, telematics or other very predictive attributes to price the risk. This results in essentially pooled risk which in aggregate drives up rates for all. Simply put, California officials did this to themselves.
For other states, the first option works but the rate increases are now significantly higher because it was near impossible to get any adequate rate increases last few years.
So, the bill has come due and it sucks for everyone as it’s either a) higher prices or b) can’t get insurance (Florida folks for certain types) or c) limited suppliers not being able to get reinsurance to share the risk results in higher rates that customers can’t afford so they go without.
https://assets.ctfassets.net/nnc41duedoho/BNR4qtOTGPJuyQADtK...
I wonder if the difference was largely because of Canada's more strict lock downs. The roads were nearly dead here for quite awhile.
I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)
For all? I'd think it reduces rates for some and increases it for others.
All of these things have either reduced or stabilized over the last two years, but prices seem to keep going up. Strange!
In practice, you are going to find they are never arbitrarily doing it. They are doing it because the price no longer covers the cost of providing the insurance. Just like when I decide the price of X isn't worth it anymore, I stop doing the transaction. The reasonable response would be to increase the price, but in some situations it's not possible due to regulation.
It's a stressful situation for many property owners. They may not realize the impact that recent high inflation has had on repair costs, especially when prices tend to spike up higher after major disasters.
If I have any sort of risk mitigation (file backup, fire alarms, spare tire, a generator, whatever) I can test that it works periodically. So I know I'm actually safe for the event.
For insurance, you can't know what bullshit they'll come up with to deny a claim when the time comes for it.
You're left with having paid for the insurance all that time for nothing! Much better to have put that money in a piggy bank instead.
If you actually feel like you could recoup of the cost of paying for insurance by instead keeping the money in a piggy bank, you are buying too much insurance. There’s a sweet spot for insurance and overpaying for too little insurance is a you-problem.
But I do think the total bullshit is that companies are just using it to come up with essentially fake reasons to drop customers:
> Cindy Picos was dropped by her home insurer last month. The reason: aerial photos of her roof, which her insurer refused to let her see. ... Her insurer said its images showed her roof had “lived its life expectancy.” Picos paid for an independent inspection that found the roof had another 10 years of life. Her insurer declined to reconsider its decision.
I also don't have a problem if an insurer decides to leave a state entirely - that decision is essentially saying the state has made it impossible for them to adequately price risk, and that's something the state should fix if so desired.
But these BS cancellation reasons seem like a case of insurers wanting to have their cake and eat it too. I'm not very familiar with state-by-state insurance law, but I'm assuming they have to come up with some reason to drop a homeowner that already has a policy, so this looks like they're trying to find BS reasons to just drop potentially less profitable parts of their portfolio.
How else are execs going to pay for that third vacation home?
What you can do, which the U.S. already does, is government-run insurance, socializing the losses among a population. Flood insurance, for example.
I’ve never seen slate roofs in California, so not sure if these are to code here. We looked at metal and other materials, but the problem is the weight is different, so now you are engaging an engineer to evaluate structure, submitting plans, dealing with code updates. Or just new asphalt shingles every 15-20 years. The payoff isn’t there and folks don’t tend to keep houses for generations, unlike in the UK.
In order to have a better roof, you probably must have a better entire house under it also.
It sounds odd to my ear to matter-of-factly state that the US is deprived due to being capital-poor.
I mean, I'm not disputing anything specific, but where do middle-class people have better access to consumer finance than the US?
If you'd asked me what single fact represents American homeowners to people interested in economics around the world, I would've guessed it's the access to 30-year fixed rate mortgages.
As far as I know this is a deliberate policy in the US, that has not been emulated by those envious of the American economy, but why I haven't a clue.
As I noted in another comment below, roofing slate is essentially unavailable in the USA due to geology - what does exist is of much lower quality than a good welsh slate. Still, in some ways I agree with you: roofing materials in general in the USA are far less durable those used in the UK and Europe, for reasons that I don't entirely undestand.
That said, it amazes me that huge numbers of people in the UK live in essentially uninsulated and almost uninsulatable buildings. Sure, winters are mild, but anytime you have the heat on in the millions of homes built post-WWII, a huge amount of is just leaking through the brick walls. US stud framed construction has its problems if done carelessly, but it does have the benefit that its easy and obvious to insulate your walls to some degree, and not hard to do it to Passivhaus standards.
That makes sense. Roofs last a pretty long time in the PNW as well, for similar reasons. Mostly we just get rain. Not a lot of particularly hard freezes, our idea of big hail is 1/4 inch, etc. It's pretty routine for a garden variety "25 year roof" to actually do all 25 years, and even 30.
An extension that was done in the 1980s has had to have its roof replaced once already due to what I have to assume was poor workmanship by the builder.
Tile and metal roofs last much longer than asphalt roofs in Florida, and while it's definitely more up front, they're generally more resistant to extreme weather (tiles are very heavy and metal is generally fastened down very well) and may get you an insurance discount. It's also for aesthetic reasons, as tile roofs are a very classic Florida look, and the stereotypical Key West house has a metal roof.
I think the biggest difference, though, is that the stereotypical single family US home of the 19th/20th century US expansion is on a large plot of land and has - so far - been one to get remodeled/expanded/revised several times in a hundred years. Houses are generally treated as mutable things, and people also often expect to move within a few decades, spending more to put in something that will hold up a hundred years instead of twenty seems foolhardy to many. If you sell it the buyer will likely want a cosmetic refresh; if you keep it, you likely will too.
For Americans who don't know anything about housing in the UK, there is an interesting article at: https://en.wikipedia.org/wiki/Council_house
Being Wikipedia in 2024, I wouldn't assume it's not all AI hallucinated references, but still, it's interesting.
Where I live we call a century-old home a "tear down" because it's probably in horrible condition. There are a handful in my neighborhood but they get sold at a discount, usually for new construction.
I just sold a century home myself, after my mother passed. There was a little bidding war for it, even in this market. There's a character to the century homes that you cannot get in a new home at anywhere near the same price point.
Climate change is coming for America’s property market Insurance is supposed to signal risk. Policymakers should let it https://www.economist.com/leaders/2023/09/21/climate-change-...
Parts of America are becoming uninsurable Blame growth in hazardous areas, climate change and bad policy https://www.economist.com/united-states/2023/09/21/parts-of-...
Health insurance has it easier too because there’s not really a concept of correlated risk in human populations. Most people do a decent job avoiding hurting themselves but when a flood comes, there’s not a whole lot anybody can do.
I think we have to get much more serious about prevention. People are doing this:
Fire safety:
https://www.npr.org/2023/08/24/1195331310/red-roof-house-fir...
Storm safety:
https://abcnews.go.com/US/mexico-beach-home-survives-hurrica...
We need to mandate this kind of building in new construction and modified construction.
It may be worthwhile to subsidize this, to help with turning existing high risks into low risks.
We need to be more severe on forbidding building in danger zones, and more accepting of insurers pricing these based on risk, so they don't have to leave the state, and others can be priced to more common levels of risk.
We also need to not allow rebuilding in areas that will have these problems again, without some way of mitigating. We should not have to pay for someone's third house in a flood zone. But if you can make it flood proof after the first one, great.
It is. The NFPA (National Fire Protection Agency) writes the National Electric Code and other safety codes that get adopted into law as building codes. It was started by a coalition of insurance agencies.
https://en.wikipedia.org/wiki/National_Fire_Protection_Assoc...
Of course we can elect politicians that change the law. Might be a hard sell if the motivation is to stop detection of illegal things.
Sources: (no general right to privacy) https://en.m.wikipedia.org/wiki/Victoria_Park_Racing_%26_Rec...
The Privacy Act (https://www.oaic.gov.au/privacy/privacy-legislation/the-priv...)
For another toy example, what if speed laws in the US were fully enforced 100% of the time - they would be yanked immediately, because they are dumb and mostly just used to fund the police. We only tolerate them because they aren't enforced on us very often as individuals. It's like a medium-skill lottery to see who pays for the police.
Or maybe people would adjust their behavior and respect speed limits? Laws that are sporadically enforced at the discretion of police officers are awful. It just enables discrimination.
Compare to somewhere like Australia where you get fined for just going a few km/h over the limit and the use speed cameras extensively.
https://www.qld.gov.au/about/newsroom/increased-penalties-fo...
Whereas it seems to be common in parts of the US for everyone on a freeway to be 10 miles/hour over the limit and nobody cares
Obviously, if I add rooms or extend vertically, they need to know. But "remodel" covers a lot.
My point is more that a totally reasonable and brief occurrence becomes permanent and without context in satellite imagery.
If risk is assessed perfectly, they know that Alan's & Charles' houses will not have a fire, but Bob's house will burn. Alan and Charles (and all the others) pay only the $0.25 overhead/profit, while Bob must pay the $125,000 ratings +profit.
Insurance basically disappears, as it adds no value, and we go back to being self-insured.
I acknowledged that all this info is already out there.
That insurance companies can demand to inspect your home.
And even further that that this aerial footage is already widely available.
My comment was specifically calling out that collecting data one house inspection at a time is different than collecting data at high volumes.
But let’s gloss over the fact that someone didn’t even fully disagree with you, but even then you couldn’t get over that one point that you didn’t like.
In fact they're actuarially very, very boring!
And I know plenty of people myself, who had legitimate accidents not of their own fault who were left $10-15K out of pocket after insurance and settlements.
Let's start with a car that was two years old, I owed $22K on. Car was totaled and most of the comps from the insurer was $25-28K. Oh good, says I. And then they find one 150 miles away that is $13,500. This drags the value down to about $20K. While there's obviously something wrong with this entry, "Doesn't say salvage title in the ad, so it's a valid comp".
It takes them over a month to figure this out, all the while they have me in a rental, and then try to tell me that they're only covering one week of rental coverage. Had to threaten to sue to get compensation for my injured wrist/arm (which was hyperextended when the airbag went off as I was holding the steering wheel).
I still ended up losing out on $6K 'equity' in my car, having to come up with another downpayment, and months of calls from various medical providers who were having a hard time getting my insurer to pay their bills.
For another driver who ran a stop sign, t-boned me, and whose insurance had admitted 100% liability within 48 hours.
https://www.rnz.co.nz/news/national/508570/auckland-annivers...
But partially enforced laws are the worst.
I didn’t deal much on commercial insurance btw, I have _some_ awareness of that.
There is no defrauding going on. You don't own someone's behaviour or property simply because you "insure" them.
You get to reject claims and put your opinion on what "fraud" is, through the proper channels.
Taking photos and dropping customers is going around the proper channels and tyrannizing your customers.
How that is not obvious to everybody involved, is beyond me.
Drop the pretense and install a command economy again like the 1940s. You are leaning in that direction anyway.
Taking photos from public airspace isn't "tyrannizing" anyone, as much as you seem to want it to be.
> You are leaning in that direction anyway.
The irony...
Otherwise I agree with you
And what are the limits on a typical freeway?
Typical limits are here. 100 km/h on most freeways, 100km/h on ones built to higher standards.
You’re (and I) are an idiot for renting because after you’re done renting you have no equity. Now compare the rental and mortgage similarly sized units and you’ll realize for about 20% more money you’re suddenly not igniting it on fire every month.
No, risk assessment and/or management is an internal operational concern.
The goal of insurance providers, home or otherwise, is to charge fees such that the insurer collects as much revenue as possible while simultaneously expending as little as possible to remedy claims.
Any justification legally available to an insurer supporting denying or reducing a claim will be employed.
(no, this is not some hippie collective thing, in many countries this is the norm, see https://en.wikipedia.org/wiki/Mutual_insurance)
It's a common misconception that co-operatives/mutuals somehow don't need to make money or will actively try to not make money, but in reality if they don't they tend to die fairly quickly.
You have too much faith in the regulators, that's not how it works.
Insurance companies are violating these rules all the time, only when you can gather a critical mass of complaints against a specific one will anything happen.
Except that according to the article this "hypothetical bullshit scenario" is already happening and there are even several examples of it happening including one where a person was rejected for the condition of their roof when the roof was brand new, and another where a person was rejected because of trees that were nothing more than shadows.
Since you know that it's so easy to "tell regulators" and get things fixed quickly you should reach out to Douglas Heller, the director of insurance at the Consumer Federation of America, because he's under the impression that “The technology is way ahead of any consumer protections” and consumer groups feel that inspections via aerial images are "worrisome because of the limited rights customers have to challenge the images"
You can find Mr. Heller here (https://consumerfed.org/expert/douglas-heller/). I'm sure Douglas would love to learn about how none of this is a problem because "insurance is insanely strictly regulated" and your expertise would mean that he can better help the people currently struggling with this issue and potentially even save others from having to deal with it in the future.
> tell the regulators
I've definitely reached out to insurance regulators in the past and things got fixed. (In the USA.)
In Europe a lot of the government fiscal crises were a result of small countries having to backstop giant cross border banks that happened to be headquartered there, and there is little appetite for tighter fiscal union.
That's from https://www.bankrate.com/insurance/homeowners-insurance/flor..., which explains how the roofing scams work in that state. The legislature is working on it.
What's actually happening in Florida is the insurance companies are Janus entities. One part is an insurance company that's subject to rate regulation and the other part is a consulting firm that gets paid large sums of money from the regulated company and that's where all the profits live.
I think you may be overestimating the extent to which UK houses are held for "generations.
Because if you're trying to use building materials that the local contractors are not familiar with, you're going to have a bad time.
It’s concerning to think that because police have traditionally had tools that were quite powerful in single use to balance out technology limitations of the time, this balance should not be rethought when the usage becomes significantly more efficient.
If you have to get a black van and big dish microphone to surveil someone’s single conversation in the park, it’s going to be employed when there’s already a strong suspicion, seems fair. Now if you’re able to hide a wireless microphone in every tree, computer-transcribe everything that’s said 24/7, and match it with cameras that can capture facial recognition data, you can build a file of everything everyone says in public, just in case you have to find something against them. What’s more, you can have an AI scrutinize every single conversation and sentiment on a scale that is not otherwise possible.
All of this uses the same fundamental rights, but clearly the outcome poses a huge problem.
Where I live in Europe, roofs are usually ceramic shingles, which should easily last 50-100 years or more.
Of course, the down side of higher quality building standards is cost. Building a houses here costs a minimum of half-a-million, and quickly hits a million...
I've lived various places in the US. With the exception of one older house, the roof trusses were a joke: so-called 2x4's (really much thinner than that), widely spaced, held together with a few nails and little or no cross-bracing. They might theoretically hold up to the weights listed, but I sure wouldn't stand under them during a test.
Where I am now, in Europe, the roof trusses are roughly 6"x10" laminated timber. That will hold a snow load.
A tar roof has an unavoidable time limit on the whole thing.
In contrast, if you set up a high fence around your pool in order to sunbathe naked, aerial photography would probably be an invasion of your privacy? If your roof was designed in a similar way, one might be able to argue it was wrong for the company to observe aspects of it without permission. (Although they might have gotten permission via the insurance contract...)
I think this legal standard becomes tricky (or at least ought to receive more scrutiny) when we start talking about pervasiveness and permanence. Just because I know that an arbitrary person might take a picture of me in public doesn't mean I expect every single thing I do outside to be recorded forever by a technological invisible stalker hovering over my shoulder at every outdoor moment.
Otherwise, it would be illegal to fly a plane or even a hot air balloon pretty much anywhere, and even things like google maps satellite view couldn't exist.
question: can a spy telescope, when it comes to apertures, lenses, focal point and scale, but most importantly perhaps, intent, be considered a microscope depending on which way its pointing? it seems to me that given the size of earth, the size of humans in realtion to that, how is it any different than monitoring a bacterial colony Wirth a microscope? functionally. its not different, right? or perhaps its more nuanced than functionally, but surely its closer to being a microscope, than a "telescope"?
street maps could definitely still exist. I saw a project here on hn that showed a land surveying satellite that was able to track land parcels and shade them accordingly using AI. and, if they can blur faces out I know they can blur rooftops and naked bums.
That a law against such a practice does or does not exist today is rather besides the point.
If we're talking morality I don't see how it's moral to ask the law to protect you from being found out doing the wrong thing. If these people don't pay their fair share the rest of us have to pay more.
What if a law change prevents the government from enforcing environmental legislation from illegal land clearing or dumping? What if a farmer illegally diverts more water than they are allowed to from a river or with a well? It's not just about you and me but the whole country.
On robodebt: that has nothing to do with privacy, tax records aren't private from the government? That's just bad tax enforcement.
That is in sharp contrast to the insurance company that is supposedly making their determination based on drone photos that they won't even let their clients see.
If the roof needs replacing (in the insurance company’s view) then charge whatever the rate is that covers that and still makes them a profit. Don’t just deny coverage.
The primary insurance market is even more illiquid than thinly traded options.
What prevents it is there are no customers willing to spend $1m on our cars.
This is the Law of Supply & Demand, and how markets work.
Their job, I think, is to accept the quote, pay the premiums, and to keep living life.
Meanwhile, toddlers do active shooter drills like they are fire alarm drills.
Totally logical country you got there with a perfectly reasonable approach to risk.
Unfortunately this is the normal ebb and flow of populations. And the stage the US is at we just have to wait for severe economic disaster to remind people what trauma is.
Not a good argument. This only holds true if your rent equals what your mortgage would be. I personally don’t care about similarly sized units — why would I compare those?
I specifically choose to rent small and inexpensive apartments and put the savings (compared to a mortgage) into other investments. So I do have quite a lot to show for myself after 20 years of renting.
I’ve been paying under $1,200 in rent for 10+ years in a neighborhood where houses are now pushing $800,000.
> Fellow renter here, what avenues do you have if your renters insurance is cancelled
The same as the homeowner does, shop for other options. Fortunately w/ renting it seems like insurance companies (thus far) don’t care that much and use it as an incentive. My partner’s car insurance provider reduced her total bill when she added rental insurance.
You’re either rent controlled or bullshit. Either way your situation is far from the norm and had you bought a house 10 years ago that’d put us right on the tail end of the crap housing market and you still would’ve ended up better buying.
Since you can’t seem to do math well, 10x12x1200=$144k just gone. If you had bought a house, and I’m correct on the 20% number, then you would’ve spent about $173k and still have the equity. Meanwhile my father-in-law bought a house around that same time for $350k and is sitting on about $1.2mil in equity now.
> The same as the homeowner does, shop for other options. Fortunately w/ renting it seems like insurance companies (thus far) don’t care that much and use it as an incentive. My partner’s car insurance provider reduced her total bill when she added rental insurance.
I don’t even know what you’re saying here. Above you claimed this was the downside of having a house, and now you’re saying you’ll just shop around. That would invalidate your first complaint about risk.
You clearly are too young to know what you’re talking about. I really hope you’re not actually investing with this mentality because if so you’ve just been getting lucky so far.
Neither. Shitty apartment and a lot of hunting lol. And it was under $1k until COVID started. Going to be $1300 at my next renewal in July.
> 10x12x1200=$144k just gone
Yes. I'll admit I'm not familiar with the logistics but I assume the government refunds the homeowner's property taxes and reimburses for costs like appliances, repairs, landscaping, etc. when the time comes for them to sell?
> Meanwhile my father-in-law bought a house around that same time for $350k and is sitting on about $1.2mil in equity now.
Good for him! I both can't buy a house in my neighborhood due to the cost and have no interest in owning a single family home.
> You clearly are too young to know what you’re talking about
Like I said, just stupid. I'm over 40.
I think there's a sort of weird subtext in the "risk pooling" discussions on this thread that "risk pooling" is a way for people who don't replace their old roofs to get protection from the people who do. But that's not at all the concept! You refusing you repair your roof isn't an act of god; it's just recklessness.
1. pre-emptively dropping or refusing coverage
2. claim inspectors concluding the company has no liability for a particular incident.
It doesn't all need to be #2 (and probably should not be), but it also doesn't all need to be #1 either.
Also, it depends on the jurisdiction, but while the insurer can try to void the whole contract, courts don’t always let them do it, especially if the policyholder convinces the court it was an innocent mistake or oversight rather than a deliberate lie.
I don't know if it really is the case that your insurance can be voided over material misrepresentations unrelated to your claim, but certainly there's no moral argument that it shouldn't work that way.
This doesn't stop expensive lawsuits, even if they ultimately don't pay the claim.
Whereas your ability to sue for a non-existent policy (or one where that was unambiguously canceled) is... much less.
Because it’s creepy.
Specifically that high levels of LDL alone are not what causes plaque buildup, and why not. Higher LDL cholesterol goes with lower chance of death, found a review of 19 cohort studies over 68,000 people, published in the British Medical Journal, for one.
Besides, the article quotes from insurance company agents that directly refutes what you are saying: "Brink, who worked for Farmers in Michigan, said some customers were dropped based on aerial images that were two or three years old. One person wasn’t renewed because of a roof, despite its being brand new."
Full stop. (I just like how people think that adding "full stop" to their comments somehow makes their position unassailable or something...)
Your logic is completely falling apart, that’s why you’re confused.
For home insurance, usually it's a mortgage requirement, which is not by law. In condominiums, the community may require it of individual owners, and then it's not really law either.
It's completely insufficient, but it's not nothing. A reasonable person would carry much more insurance.
That said, that seems like a risky idea in a world full of LLCs, trusts, etc.
In either the bond, deposit, or liability insurance scenario, the responsible party remains on the hook for whatever is not covered in advance.
You're free to go without insurance on a house that you own, but so long as the bank owns it, they're going to make insurance mandatory, and that has nothing to do with lobbying.
No, it wouldn't. It would go down to the value of the land (where a construction is permitted).
Nowadays, that's often more than 90% of the price.
Only very approximately - it depends on contextual situation.
We had a ton of uninsurable "as-is" houses after the Christchurch Earthquake. Prices for those houses dropped massively because without a mortgage you only get cash bidders so demand was relatively low compared with supply. The price someone is willing to pay for an as-is property depends on many factors, and it can easily be below land valuation.
Firstly desperate or naive sellers would accept well below the land value. You assume that that there are enough buyers to compete. There were not enough buyers shortly after the quake because not enough had cash so there were very cheap properties. Plus you were buying risk too - you simply couldn't price correctly because there were too many unknowns - when whole suburbs are uninhabitable a new construction is irrelevant. The city population dropped significantly.
You could offer below land value on some properties because you are also purchasing a liability e.g. the council required some houses to be demolished & removed (demolition costs were tens of thousands - and demo companies were busy as fuck).
You might pay a lot more than land value:
• Some places could still be rented (uninsurable is not uninhabitable) so potential income mattered.
• Many places just needed work done - sometimes not much - but often a new foundation e.g. lift house and put in new foundation. New foundations had to be compliant with earthquake strengthening rules so usually very very expensive. The as-is homes were often sold by the insurance companies because they were uneconomic to fix.
I advise everyone to be very careful buying property in suburbs or cities where all houses have common/correlated risks of an event - floods - fire - etcetera. Insurance premiums will rise until it is unaffordable - then all houses will not maintain value. Disclosure: I do live in a flood prone suburb but I can afford to self-insure and most people cannot do that.
Even worse: insurance did not cover the financial losses for many people in the Christchurch Earthquake. Especially small businesses. Then again - many other people ended up with huge payouts and were financially much better off. However even then money is usually a poor substitute for emotional costs.
Construction is pretty expensive too.
Home insurance isn't mandatory, but refinancing your mortgage is impossibile without one.
There are good drivers and bad drivers. There are also good homeowners and bad homeowners. I live in Florida, but chose not to live in a flood-prone area. We also have hurricane clips on our roof, and we just changed all our windows to impact-resistant windows (with the help of a state-sponsored program, actually). Our insurance isn’t that high at all. Could it be lower? Sure, I’d love that. And maybe a national program would do that.
Modern building codes require things like impact windows and that the building be rated for high winds. Older buildings should be retrofitted with things like impact windows, but I would only call those homeowners “bad drivers” if they can afford to do so but don’t. I wouldn’t blame an elderly person on fixed income for not affording to do this and call them a “bad driver”.
I’ve walked around San Francisco quite a bit since my company is based out of there, and I’ve seen a lot of people retrofitting their houses with those diagonal beams for earthquakes. San Francisco is waiting for the “big one”; is anyone who can’t dump money into living in a safer building, or retrofitting the one they own, the equivalent of a “bad driver”? Obviously not.
FYI in Tampa, also called the “Bay Area” to locals, we’re also waiting for “the big one” (a CAT-4 or CAT-5 coming directly into shallow Tampa Bay, which would cause an enormous storm surge). That last happened in 1918 or so and it actually permanently changed the geography where it came in, creating an area known as Hurricane Pass. All we can do is prepare and be responsible to our communities.
Anyways, you can’t lump all people in a geography, regardless of behavior, into one group. It does a disservice to the people who are doing the right thing.
Unless your building has been fully retrofitted for [insert local disaster] or you chose to live outside of [insert worst geography in your area to live with regards to local disaster], then you’re a “bad driver” too.
This process is called subrogation and it is out of the control of the injured person.
Absolutely not my experience at all. Even still, the insurance company has no right to press charges.
Everyone is upset their rate is going up but the issue is lack of ability to use predictive underwriting because of what you said and more.
Insurance is a for-profit enterprise and as an expert told me, "the goal of insurance companies is to not pay claims". It essentially wants to be passive income at the end of the day.
Modern capitalism runs on insurance but should it? Health insurance is a great example: it shouldn't exist, and is unnecessary in single-payer systems. Car insurance is another example, where you can argue that insurance is locked-in to hide the fact that cars are systematically unsafe. Note how you don't need insurance to ride the subway.
The point is, insurance exists to make rich people richer off of risks that could be addressed socially in other ways. When we see that entire states are losing home insurance because of other systematic problems like climate change we should look at the system itself. Maybe making profit off of people's unavoidable risk isn't a great idea.
EDIT: in response to parent, my point is that focusing on the ills of regulators harming efficiency needs to account for the impossible job regulators have in the first place, which is making an unfair system (insurance) fair.
The observation is that if you aren't able to discriminate at all or subdivide the pools, the only response is to up the average rate to cover the aggregate risk as best you can estimate it. This gets tricky if your ability to change rates is constrained, also.
These things are always in fundamental tension, and also in tension with privacy. It's not an easy problem.
Even worse for the consumer is that insurance rules say you have to “offer” insurance in the state to get your license.
Well, you don’t want to drop your license but really don’t want to have a bunch of policies. What do you do?
You make it impossibly difficult to get insurance. I’m not going to name names but a lot of insurance companies in California are doing this.
No online applications, have to call in, have to fax in or mail paperwork required and so on…
I was very confused until I realized they were doing exactly what you said.
If everybody is sharing all the risk that’s the same thing (obviously I’m being simplistic) as them underwriting the risk themselves.
The point is pooling unpredictable risk. You don't know ahead of time if your house is going to flood. You do know ahead of time if your house is on a flood plane. Therefore, people with houses on a flood plane pay more for flood insurance.
The alternative is that low risk customers can't get insurance because they'd have to pay the same as high risk customers and that isn't worth it. Additionally, then people build tons of houses in extremely high risk areas because they can buy insurance for the same price as someone not doing something stupid, which is a moral hazard. Existing regulations have already caused this to happen in many cases.
This is important point about knowledge which I feel leads towards another kind of hazard: Which party is capable of predicting risk and how that information asymmetry may be exploited.
We already spend a lot of time thinking about one direction, where the insured hides a pre-existing condition or their nefarious plan to commit arson, or whatever.
But what about the other direction? What about when the insurer has tools and relationships to determine something but doesn't tell the insured?
That might either be because there's not enough competitive pressure to make them lower the premium, or perhaps they raised the premium to cover the higher risk but refuse to disclose exactly what the risk is or how they determined it.
Of course, if you don't have enough competition that doesn't work, but then your problem is that you don't have enough competition. Which, especially in insurance markets, is generally caused by regulatory barriers.
You mean like this one? https://www.yahoo.com/news/united-airlines-flight-diverted-t...
…I’ll see myself out.
If you can’t use predictive attributes, many not allowed in California, you’re not going to get reinsurance interest because you can’t really balance the risk across different risk types for drivers.
So the end result is the customer pays more, despite their driving record being clean, because that’s the only way to manage through the risk.
$200,000 is a much better floor than, for example, Ohio's $25,000. An Ohioan friend was injured by a motorist who had the minimum coverage. Her care cost more than that. The motorist who caused the injuries didn't have a lot of assets and she was unable to recover the excess from the motorist.
Still, there are some perhaps unintended downsides. Canadian rental car companies, as the owners of the vehicles, are obliged to provide $200,000 insurance as part of every contract. As a result, it seems there's not much market for them to sell excess liability insurance, and none do that I'm aware of. I, as someone who has plenty of assets to lose if I injured someone, would happily buy a higher liability insurance. Doubly so when I rent a car to travel to the US, since the terms of the contract are often "the rental car company will provide the minimum insurance required in the jurisdiction where the claim is incurred".
[1]: https://www.ontario.ca/laws/statute/90c25 [2]: https://www.ontario.ca/laws/statute/90i08
I agree that 200k is a much better minimum. Although I would think a deposit of $200k should be just as good as a policy of $200k... But the Ontario law doesn't allow for a deposit.
I wonder if there's a speciality business available in Ontario for single customer insurance, so individuals or businesses can self-insure without risk pooling.
Auto insurance is mandatory, and it can be government run, or private.
Other areas of insurance can be indirectly required, say one side of renting, etc. Effectively lenders can set the conditions they desire.
The point is that regulators have not been allowing rate increases with good faith justifications for years and now that they see their actions have caused companies to pull out they’re pointing the finger at the companies when it’s their poor judgment for years coming to fruition.
For all these reasons, insurers typically must justify rate increases.
Whether this even happened is questionable. Regardless, we trust government regulators to operate in good faith 10x more than private sector corporations.
Insurers with better information will be able to judge risk better, so they can undercut competitors on lower risk or avoid taking on higher risk. That really is what a competitive insurance market should be like right?
Distribution is also a huge factor in who wins. You can have the best product, but if you can't get it out to enough people, whether direct to consumer or through agents, you're going to struggle. A lot of startups have focused on direct-to-consumer plays, but there's value in taking a hybrid approach to distribution and incorporating agents into your distribution strategy. It's surprising sometimes, for those of us with a tech background, to see how sticky human insurance agents have proven to be. I can make a better potato chip than Frito-Lay, but if I can’t get stores to stock it, it doesn’t matter how good it is.
Should be. But states like California cap insurance rates in such a way that insurers are dropping (non-renewing) policies, since they can't charge market rates.
The solution was to complain vociferously to the folks that maintained data sources. In those days it was Google, someone else, and it turned out the remainder of the defective commercial products were put out by a predecessor of, I think, the folks who eventually published or supplied the data for HERE We Go. Basically, every few months I would call them or write messages to them, social engineering who might be in a position to fix it. They did respond pretty quickly, for a bigcorp, but it took a few years for the prior versions of their database to cycle out of usage.
(The federal government, for mostly historical reasons, does not generally regulate insurance except for health insurance, and that only started with Obamacare. So each state has its own DOI, and agents and carriers have to get licensed in each state. It's a dumb, byzantine system going back to Paul v. Virginia in 1869, when the Supreme Court ruled that issuing a policy of insurance is not a transaction of commerce. I don't think that reasoning applies today, but Congress has specifically exempted insurance from things like anti-trust legislation since then. Sweeping insurance under federal regulation would, in theory, cause a giant mess since there's so much law and process built around the current state-by-state system. IMO it would be worth it because the current system is completely ridiculous, but so it goes.)
I think that is very reasonable law: If n organisation makes decision about your relations, you should be able to force them to process correct information.
(I have used that clause ones, when a bank wrongly reported that I had an open account of a certain type, which resultet in that I could not open that type of account at another bank.)
For example the insurance company had the correct address for the person (no need to correct) but the wrong information about the location of the address.
I worked it for a year and was unsuccessful in removing it. Ironically, my wife passed away but the accident is now associated with her car. They did figure out however, that I’m no longer eligible for a multi-driver discount.
That is some breathtaking hubris.
Me too. So. many. lemons :-)
But then you go on to claim you have a lot in investments, or something along those lines as it wasn’t clear. Your story’s dots aren’t connecting.
Thing is, I think you’re actually desperate to own a home, as am I. And now your justifying your desperation with this flawed idea that renting is somehow cheaper. There is no reality in which this is true, that’s why you see the bulk of people flocking to buy and all of us complaining that the party is over.
You’re wrong.
Yes that is correct. Ladd's Addition in, Portland, OR. The floor for fixer-upper houses within a half mile might be $500k but I see $800k+ very regularly. I'm sure you can find something to quibble with here though.
Somehow in my 40-year life I've always managed to find small, cheap, shitty apartments in good neighborhoods. I guess either I am the luckiest person alive or most people aren't excited to live in small, shitty, and cheap apartments?
> But then you go on to claim you have a lot in investments, or something along those lines as it wasn’t clear. Your story’s dots aren’t connecting.
I put a few thousand into index funds each month. I could easily buy a house with cash in a place where I'm not excited to live.
But why would I? I don't want a house. I like my cheap small shitty apartment because it's in a great neighborhood. My money's growing just fine. I have enough.
> And now your justifying your desperation with this flawed idea that renting is somehow cheaper.
You're wrong.
I said that renting can be an attractive decision despite having no home equity at the end.
I understand that owning a home can be an attractive decision as well.
I just think that people who are fanatical about how bad a decision renting is are generally wrong.
Because you’re not lighting rent money on fire every month. I’m sorry you can’t understand this, and all I wanted to do was help you understand. But it isn’t my money so keep the delusion, I don’t care anymore.
So you think your landlord is eating those costs and not passing them on to you in your rent? You seriously think they are running a charity?!?
Obviously not, but since my rent is low enough then I don't care. They can only be passing $1200 in costs along to me because that's what I'm paying.
My rent being lower than costs for homes is what works in my favor. I lose money forever but it's a relatively small amount of money. The rest of my money can go somewhere else.
Someone underwriting their own risk might as well not have actual insurance, as they’re just on the hook for actual damages correct?
So if they get sued for $1M, then they are on the hook for $1M (as an individual).
If everyone is sharing the risk, then everyone is on the hook for $1M/number of people.
So the individual that gets sued for $1M in a large state, might only be on the hook for a couple cents for their own lawsuit. Though they’d also be in the hook to the same degree for some other asshole getting sued.
Which is why insurance creates moral hazard (for things someone can control), and reduces catastrophic damage to individuals (for things someone cannot control).
another couple quirks: stock buybacks generally inflate the value of remaining shares (not bought back) for the public traded company shareholders...what they hoped for when acquiring shares. some companies increase dividends to return value, rather than fiddle with share prices.
but, yeah, agreed to your general observation.
I'm not lighting it on fire! I'm getting a place to live.
The homeowner is also lighting money on fire every month! They don't get a check back from the roofing company when they sell their house. They don't get a rebate from GE for the stove they bought 20 years ago. They get the benefit of having a stove in their house and a roof on their home.
In 20 or 30 years or whatever I have a Vanguard account with a couple hundred thousand dollars in it. In 20 or 30 years the homeowner sells and gets a big check as a result. Why do I care if their check is bigger than my Vanguard account?
(When I bought a house, the sales contract was maybe 50 pages. I went to the escrow company to sign. The escrow agent was visibly annoyed that I leaned back in the chair and set about reading every page. One of the pages that needed to be signed said nothing but "I have read and understood this contract.")
Except, Courts have ruled that you can, at least sometimes, get out of the fine print of a contract by claiming you didn't read it. For example, see the notable 1962 Supreme Court of California case, Steven v. Fidelity Casualty Co [0].
In 1957, plaintiff purchased a life insurance policy covering plane crashes, from a vending machine in Los Angeles, with his wife as the beneficiary. His itinerary took him from LA to Chicago, and from there to Dayton, Ohio. On his return from Dayton to Chicago, he'd scheduled a one night stopover in Terre Haute, Indiana. In the morning, he went to the airport in Terre Haute, and was distressed to discover the flight had been cancelled due to technical issues, and he was going to miss his connection in Chicago. The airline agent referred him to a charter airline, who organised a charter flight for him and a handful of other passengers back to Chicago. Sadly, the charter flight crashed, and he died.
His widow sought to claim on the life insurance policy. The insurer denied the claim, on the grounds that the fine print of the policy said that it only applied to scheduled air carriers, not charter flights, and hence the flight on which the insured died was excluded. His widow sued the insurance company in the name of her deceased husband. The trial court sided with the insurer, on the grounds that this clause was clearly stated in the fine print of the policy, which the policyholder was expected to have read, and he had signed to say that he had.
However, on appeal, the Supreme Court of California overturned the judgement, and ruled for the widow. It held that, for consumer insurance contracts, any clause or exclusion which the policyholder could not have reasonably expected, must be pointed out prominently, not buried in the fine print. Since, it ruled, the policyholder had no particular reason to expect the exclusion of charter flights, and the insurer had not prominently stated that exclusion in the policy (e.g. by using a larger font), it was not legally binding.
And, from what I understand, the rule established in this 1962 case is followed in California law to this day, and has also been adopted by the courts of several other US states
Why should anyone think the fine print is irrelevant? Everything in a contract is relevant, or it wouldn't be in the contract.
Even then, it took me several calls and interactions to get them to send me the actual detailed insurance contract. They tried to fob me off several times with a brief summary document.
I would be surprised, based on my experience, if people are actually confronted with the paperwork as you suggest. The default flow of my home purchase made it clear that my request to review the coverage contract was so far outside the norm that they weren’t really sure how to handle it.
Its doesnt matter what mumbo jumbo they come up with, if you cave to peer pressure then accept the risks. Or vote with your wallet.
How could I have signed a contract without seeing it? I wouldn’t have anything to sign!
But none of that was my point. My point was—if asking to see the agreement was this far outside the norm, then how many people are actually confronted with the paperwork? My guess, based on my anecdotal experience, is not many.
The first page or so will explain who the policyholder is, what is the effective date of the policy, and what forms constitute the insurance being provided. The rest of the policy is (usually) a set of forms approved by the state insurance commissioner that define, in particular, what is and is not being insured. Be aware that something that is very clearly defined on the first page of the first form is very frequently completely contradicted by something on the fifteenth page of the thirtieth form, which makes it very important to have the complete set.
In general insurance law is such that you ought to be able to read the entire policy and make sense of it - no tricks. In practice there are some wrinkles and it's good to consult a professional but if you read the policy you will at least have some awareness of the coverage you can expect.
Indeed. This is how I discovered that my own policy forbade me to own a dog belonging, even in part, to any of a long list of breeds: Pit Bull, Rottweiler, Cana Presario ... IIRC German Shepherd was on the list.
It’s frankly unrealistic to expect most people to remember their home insurance asking about trampolines 15+ years ago.
That said whether the regulators are effective in keeping costs down is a different issue. But my not-very-deep understanding is that risks are rising, e.g. large wildfires in the US West, and increased hurricane frequency and strength on the Gulf Coast, and the only way to deal with that for the insurers is to raise prices, or drop customers - sometimes to the point of abandoning the market altogether. This sounds like another piece in that trend.
I guarantee you income is correlated with state of home repair. If insurance companies can more easily access state of repair, lower income individuals will end up paying more than they did previously.
Regardless of whether that is fair, it is a change from the status quo, and it’s obvious why some people would consider that problematic.
Just don’t get insurance and nothing of yours will pay for anything belonging to anybody else.
Every new data point partitions the statistical population size into two smaller parts, each with their own larger variance (ie the insurance company's risk). The insurance company could statistically combine the risk from each partition into the same original, but it's more likely they'll focus on the higher independent risk figures and raise premiums an outsized amount to cover each individually. And this effect is going to be more pronounced the more lopsided the partition is, leading to similar monoculture incentives as we see in the mortgage/housing bubble. For example, I'd bet there's somewhat of a correlation between insurance claims and whether a house is painted beige.
That is how rates can go up even when the extra data is fundamentally sound. But there can also be just enough extra information to be damning, but not enough to exonerate. For example after the "Do you have a trampoline" question, is there a follow up of "Do you let guests use it" ? Or perhaps a more formal "opt out of all liability coverage for the trampoline" ? Likely not.
Then of course there are places where the model is irrelevant or even outright wrong, because the thing being singled out seems like it rocks the boat. Like the driver surveillance devices that penalize focused acceleration due to perceived association with racing, when it's much more likely that the driver is actually paying attention to driving. Or penalizing people for going over the posted speed limit, when it's actually safer to go the prevailing speed of the road.
Elaborating on my second criticism - let's say someone has a trampoline but never has guests at their house. The insurance company asks about the first condition, but doesn't ask about the second condition. If the customer lies about having a trampoline, it's likely that they are actually still being subsidized by their neighbors as their overall risk of liability claims is much lower.
And I've actually got to wonder if lying about having a trampoline is technically even fraud. Are home insurance companies legally obligated to pay/defend liability claims stemming from things you lied about? If not, then it would seem there is no fraud (unless you also lie for the claim) - the claim can just be denied, and liability coverage isn't relied upon by a mortgage.
In fact your price will propably increase since more overhead needs to be allocated to fewer customers.
That's exactly what insurance is. The whole premise is that they will dip into other people's payments to pay you if you ever encounter a covered issue. If insurance only ever paid you back some fraction X of your own contributions, why would you ever buy it? It would make infinitely more sense to deposit whatever you would have paid to insurance in a high yield savings account.
Another poster here, Scoundreller, recently responded to one of my comments on another topic with this insight:
> The funny thing about insurance is that as it becomes perfect at assessing risk, it becomes worthless.
> Oh, you’re about to have a $x claim this year, your premium is $x + y% admin fee.
> Just self insure and save yourself the y%.
There's likely a point where the more accurately priced a policy is the less worthwhile that policy is to purchase, which really wouldn't be a good thing for the insurance industry. The use of aerial photography probably isn't enough to put them over that threshold, but the closer they get, the less attractive their offerings will be. Considering that the insurance companies mentioned in the article have billions in revenue and assets I'm not sure they have a compelling need to resort to this level of surveillance in order to make good money. None of them appear to be going broke due to rogue trampolines anyway.
If a group of ten people all have a one in one-thousand per year chance of a million-dollar loss each year, then their annual premium will be:
10 x 0.001 x $1,000,000 = $10,000 (plus some administrative overhead and assuming a very basic risk model)
It has nothing to do with who is rich and who is poor or making anyone come out ahead of their own losses.
More importantly, each person in this group has a different chance of a million-dollar loss each year, and it's important if you're going to write a policy to get that chance as accurate as possible.
Some members of the pool have a 1-in-1000 chance per year, others have a 1-in-10 chance.
An efficient insurance market assess who has what risk, and offers premium commensurate with risk. If you're one of the 1-in-10 people you pay more.
A risk pool combines resources to pay out for losses that are otherwise individually unaffordable by each member of the pool. It is explicitly not a mechanism - nor is the intent to - have members with wildly different risk exposure pay the same premium. In fact the only way it can sustainably function is if each member's risk level is accurately gauged to some level of precision.
There are risk pools where the intent is to subsidize higher-risk members, where we believe that such subsidy is a social good - health insurance for example is one of those things.
But I don't see a good argument that home insurance is, or should be, one of these types of risk pools.
But that's not what would happen. You would still have insurance because what we really have is 8 billion people in the world (or 300 million in America or 10 million in your state or 1 million in your city or 500 in your neighborhood/village) and each person in that group of people derives some utility from other people in that group not having to pay full price for their broken roof, whether that's because when you go talk to your neighbor he's not complaining about his roof all day or because your neighbor is your doctor and you want him in the hospital instead of running around trying to fix his roof all day or sitting at home wet because he can't afford it. The total amount of that utility multiplied by how much money the entire group makes might be less or more than the price of roofs for everyone in that group.
So it's both. You're trying to discover the network of people (or create/convince that network, sometimes by threat of violence in the case of government-mandated insurance) in whose interest it is to redistribute their wealth to a given person.
Yes, if you could 100% guarantee that someone was going to have a $Y valued claim, their premium would fairly be 100% of $Y at least in order to allow for their contribution to the risk pool. Problem is, you cannot 100% predict the future, and there is no model capable of doing so, nor will there likely ever be. Nor can you predict that any other insured risk might not materialise in the meantime.
More to the point, it fundamentally misunderstands what insurance is and how it works, not least the commercial considerations involved. If there is a 100% risk of risk X materialising, the insurer won't rate your premium at the cost of risk X; it will simply exclude risk X from your policy and rate your premium based on all the other myriad risks that might arise that year in an attempt to win your business and collect premium for what, to them, is a better bet.
This already happens, incidentally; travel insurance policies will exclude pre-existing conditions or recurrences of previous illnesses as a matter of course, because if someone (e.g.) has cancer, the odds of them needing to claim on their policy - and as such draw down from the pool more than they paid in premium - skyrocket.
Which makes it odd that there are people who can't get insurance at all because of one factor like a tree or a roof. Instead of these companies (rightly or not) excluding those risks they're just dropping the customers or refusing to insure them.
> Problem is, you cannot 100% predict the future, and there is no model capable of doing so, nor will there likely ever be.
As insurance companies get more data about you from constant surveillance and data brokers it's possible for them to assume things with far more certainty. Worse, they don't seem to care too much about accuracy either. Your health insurance could cost you more next year because data shows more people in your zip code are spending more time in fast food drive thru lanes. People have had their DNA leaked! Predicting the future (accurately or not) is getting easier every day.
> This already happens, incidentally; travel insurance policies will exclude pre-existing conditions or recurrences of previous illnesses as a matter of course
I think that's reasonable for things that nearly certain to happen. It's easy to exclude cancer in a travel insurance policy and still provide some value. It's a lot less likely when it comes to something like flood insurance where your house either floods or it doesn't, although there are certainly houses in places that flood so regularly that they shouldn't be insurable at all and no one should live there. There's a balance that's difficult to strike because the incentive is for insurers to drop anyone who has any real risk.
My guess is that it probably would have been possible. At that point, we’re already under contract (which means our offer has been accepted), and finalizing the loan and home owner’s insurance was part of closing.
The reason I didn’t dig into it too much at the time is I figured that the bank was probably a more sophisticated purchaser than I would have been, especially given the time pressure of needing to make a (reasonably) quick decision.
So I decided that, despite my immense annoyance and not being able to see the homeowners insurance agreement before the closing was complete, that I’d accept the bank’s choice, and use my first year of homeownership to learn the contract and decide if I wanted to change carriers.
Now you frame this like I am too high risk or people in this capacity are too high risk, but that is the whole problem. Insurance cos are inconsistently making these determinations and the state's governance is directly responsible for the lack of regulation and enforcement. Nothing in my area has changed, but the insurance company has enacted the equivalent of ex post facto evaluation due to the state of CA. As example, my roof in great condition, passed inspection when purchase property a few years ago. I don't have certificates or invoices for repairs done to it in the 50 years of my home's life because I've only owned the property for a few years. The insurance company canceled my insurance stating I refused to provide such an invoice. They also claimed I'm now in a dangerous fire zone (I'm not) which I wasn't a year ago. They also claimed to need invoice of repairs for my plumbing, which again, is in wonderful condition. They stated simply providing inspection receipts wouldn't cut it and expensive certificates were needed. Anyways, I doubt you will read this but it's ridiculous and I'm not the only one in this state going through it.
The evidence I’d look for is something like their revenue vs payout over maybe the last 5 years?
I think a lot of this stuff can be very unintuitive, because we look around, and everything seems fine, and nothing seems to have changed, but they’re operating at a bulk statistical level, and their models revised on recent trends are probably telling them that they can’t profitably insure you for the amounts they’re allowed to charge. Some of that is that labor to rebuild/replacement cost has gotten much more expensive (we see that in our insurance rate changes despite being in an area with very little catastrophic risk).
And CA politicians’ response is probably some crowd pleasing but ultimately harmful “you can’t profiteer off our people, you’re not allowed to raise rates more than 3%” or something. So the only winning move becomes not to play except in the areas where you can make that work.
It does sound like they were just trying to find a way that they could cancel your policy without getting in trouble with the state insurance commission, though I don’t know enough about insurance to say if/why they’d need to.
Car prices are not regulated because there are plenty of options for the consumer.
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.
It’s a market type that is fundamentally messy and prone to abusive behavior by both sides.
Insurance rates are regulated for the same reason most states regulate utility rates. You can’t really opt out and the markets where price regulations have been removed have left most consumers worse off.
They’re obviously related but less regulatory focus on rates, more on cost of business and that.
Edit: Basically you can run at a loss (most do) for a limited period of time but have to show that you will be liquid on the other side of the losses.
I would say overall there's no good answer to this problem that everybody would be happy with, just maybe one you consider "less bad" than the other ones.
https://www.mass.gov/info-details/massachusetts-auto-insuran...
It is also the theory behind universal healthcare coverage, because people will have medical issues that eventually end them in the ER regardless of coverage status and someone has to get paid for services rendered. And also insurers will literally take any excuse to deny coverage if they can.
Source: https://www.lawteacher.net/free-law-essays/judicial-law/gove...
Or, to be precise, the benefits are concrete go to precise groups of people, the costs are abstract and diffuse. Same thing as protective tariffs.
Longer term, this is bad for a society in general, and politicians do know this.
There are all sorts of potential societal consequences to people losing homes that cost the society (us!) money (homelessness, vandalism, entire neighborhoods going the way of Detroit suburbs, and much, much more). Society doesn't want this to happen.
So, it’s a complex thing but the state has a vested interest in drivers being insured because of state / federal funding for roads, infrastructure and all of that.
The original intent was to stop humans from being greedy assholes and to provide a stick for when they messed up. Without the states involvement, insurance would likely go the way of used auto with “buy here pay here” lots which is a net negative for the state & society as a whole.
They want to make sure that “fair” prices are set so that there isn’t an overly disproportionate amount of people who need the insurance not having insurance. In reality, the less risky drivers do for all intents and purposes help off-set the cost of the more risky people but all of that is hidden in the premium logic.
At the end of the day, what has happened though is the state’s regulatory group overstepping their bounds (in my opinion) and ignoring good faith proposals with data showing why rate increases are needed which leads to situations we’re in now.
Having been in that world (I left it) I can honestly say there has to be some regulations or regulatory body because a lot of these folks spend so much time looking at numbers (actuarial science in general) they forget the fact there are humans behind those numbers.
Why wouldn't they be?
The only reason why you might believe they shouldn't be is if you fell for the "free market knows all" nonsense.
The state interest stems from the political interests of elected officials. See comment above by @broprogrammernot.
They may not have been well designed, or they may not wear well. But most of the time they are put in place because somebody got badly hurt, one way or another.
Industry could usually design itself better regulation. But unless it finds a way to mutually enforce compliance, the task will fall to government.
Private insurers have the incentive to price this in. If they can predict you're going to be high risk, or uncover evidence of arson, they can charge you higher rates or refuse coverage. For state insurers the cost goes on the taxpayer and if claims are refused for legitimate reasons, the perpetrators go to the media and accuse the state of bankrupting their family. This puts pressure on elected officials to shift the burden of this fraud onto the taxpayer, whereas private insurers would push back because they have a direct financial incentive not to eat the cost of fraud and mispriced risk.
There are mutual insurance companies [1], including the largest insurance company in the US (State Farm). At the end of every year, if the amount of money left over exceeds the formula they have set, every policyholder gets a refund.
That's commonly a requirement of regulation too. I've had refunds from car insurance and healthcare insurance because claims were lower than expected.
https://en.wikipedia.org/wiki/Reinsurance
If the final insurer is the government, you don't have the risk of ruin because you have control of the money printer.
If you believe that in an infinite time scale the spike of a "random walk martingale" will exceed every level, then you also believe that you'll go bankrupt even if you don't sell insurance at break even. Maybe mathematically incorrect, but entirely irrelevant in the real world.
IN ADDITION, the money that insurers make isn't just the underwriting profit but also the investment profit. You you're talking twice as much shit as the average HN commenter.
https://en.wikipedia.org/wiki/Insurance_Corporation_of_Briti...
After all, we can't have the community suffer an unsustainable loss because some guy earned too much money and selfishly bought a Camaro.
So, obviously the collective should create a list of cheap and economical cars ordinary people are allowed to buy.
If that doesn't feel right to you, remember, the so called "freedom of choice" is a bourgeois value. Transcend it.
Yep, we already do that. Vehicles and houses have to conform to a set of standards that provide security and safety measures for others, e.g. "Street legal" car restrictions, fire hazard safety requirements and building permit regulations and state codes that adhere to city guidelines, etc. Might need to include a few more talking points from the political pundit you're regurgitating views from for a better argument.
There are two provinces in Canada (British Columbia and Saskatchewan, since 1973 and 1945 respectively) who have a crown insurance corporation and require everyone purchase insurance through the government.
Neither of them force everyone to drive a Lada.
This is pretty basic? Like, it's an economics frequently asked question why buying an insurance policy isn't as irrational as playing the lottery, since both have negative dollar EV.
Or is it about risk? Those places have a fair few large disasters, and one is sinking while denying it.
Insurance is for catastrophic losses. I don't pay for insurance to make a profit, I make it to avoid the large tail loss of having the house destroyed and having to pay the value of the mortgage to the bank.
That means there will always be an argument around what a reasonable party would consider a surprising clause, but contract law disputes deal with nuance, edge cases, and what a reasonable party would expect all the time. With rulings like this corporations will air on the side of caution when taking big swings in forming their agreements since litigation is so costly and the outcome so uncertain. Consumers gain a little power back (though still far from equal footing).
This should only apply when there are large power imbalances, such as individual people entering agreements with vast multinational corporations. When big corps ink deals with each other caveat emptor should reign; they have equal opportunity to review and understand the terms and therefore have to live with the consequences.
It's not unreasonable to expect a party to a contract to read all of it. If one's case is based on "I didn't read it", the other party should prevail.
> Consumers gain a little power back (though still far from equal footing).
The consumer can always say "no". An important feature of a free market is there are no forced contracts. Saying "no" is the ultimate power.
Walter, you are a very smart guy. And this is a site which attracts people with above average intelligence and education. It is easy to forget that not everyone is as smart or well-educated as we are.
I know a guy who has been diagnosed with borderline intellectual functioning (i.e. his IQ is above the cutoff for intellectual disability, but only just). He blames it on his alcoholic mother drinking when she was pregnant. He's able to live independently, he drives a truck for a living. But no way is he ever going to be able to comprehend all by himself the dense fine-print of a contract. The law has to look after people like him, not just people like you or me. There are literally millions of people like him out there – around 13% of the population has an IQ in the borderline range.
> The consumer can always say "no". An important feature of a free market is there are no forced contracts. Saying "no" is the ultimate power.
Some products, people need to buy to meet their basic human needs and to function in society. For many of those products, there are only a small number of vendors available. If all of them demand you sign an incomprehensible barrage of legalese, you can't realistically say "no" to doing so. It might not be a "forced contract" in an abstract theoretical sense, but it sure is in a practical sense.
I just checked my insurance policy. The word "trampoline" never once occurs in it. I don't think my insurer cares about trampolines.
If I think about it: given the absurdly large payouts for some injury lawsuits in the US, I understand why American insurers might be particularly sensitive to things that might induce injury, like trampolines. Given Australian courts tend to be much more modest in the damages they award, I can see why Australian insurers might not see them as something worth paying any special attention to.
Also, even in the US: it might seem obvious to someone who grew up there, but for an immigrant from a country with a different insurance system, it wouldn’t be obvious
California won't let them underwrite to accurately reflect the location risk, so they're pulling out instead. It's basically exactly what Tptacek said, only demonstrating it via the stupidity of California's law.
1. A person is at a friend's house for dinner
2. Upon leaving to go home, they trip and fall trying to navigate an unlit path to their car
3. Their injury lands them in the hospital and requires a week or so of recovery time in which they could not work, and as they contract out they lose that money
4. The health insurance that fully covered their injury, looks at the medical records and finds that the injury occurred on another property and calls the people involved and finds out about the unlit path
5. They deny payment for the medical treatments and tell the injured person to sue the friend for medical payment because they are at fault and they have home owner's insurance
6. Forced to sue the friend or be out tens of thousands of dollars, the injured person adds to the claim for lost wages (hey, the friend isn't paying for it anyway, the insurance is)
This is how you end up with such lawsuits that the USA is famous for -- people are forced to sue other people in order to not go bankrupt, and things get piled on that.
In Australia, if you are seriously injured, you will be sent to a public hospital, where the government will fit the bill for your treatment. If it is a workplace injury or a motor vehicle accident, they might seek to recover costs from the compulsory private insurance in those cases, but otherwise they wouldn't. Many people also have private health insurance, but the private system usually doesn't get involved in accidents and trauma, it prefers to focus on things with greater predictability and profitability (e.g. hip replacements).
Every country is different, but I suspect in many other countries with either public or hybrid public/private systems, it is going to be a similar story
> This is how you end up with such lawsuits that the USA is famous for -- people are forced to sue other people in order to not go bankrupt, and things get piled on that.
It isn't just about lawsuits, it is also about damages payouts. In the US, there is a very broad constitutional right to a jury trial, which extends to civil lawsuits; and (in many cases) the law entrusts the jury, not just with deciding whether the plaintiff has factually proven their case, but also with awarding damages. American lawyers have mastered the art of emotionally convincing jurors to make big awards (especially if the defendant is a big corporation, or an unsavoury private individual). And big awards create precedent for bigger awards in the future. Even though judges can reduce jury damages awards, and often do, I think that only partly reverses the impact of juries in encouraging their growth. Also, the fact that many states have elected judges makes them hesitate about reducing jury damages too much, since that might offend the voters and threaten their re-election chances
Compare Australia: we also have a constitutional right to a jury trial, but it only applies to the most serious federal crimes; it does not apply to less serious federal crimes, nor state crimes (regardless of seriousness), and there is no constitutional right to a jury in civil cases. Sometimes, you can get yourself a jury in a civil case (depending on various complex legal factors), but in practice the majority of civil trials don't have one. And even when there is a jury, the norm is the jury only decides whether the plaintiff has proven the facts of their case, and damages is wholly up to the judge. Judges tend to be much more conservative in awarding damages, and as a result, the runaway damages inflation which has happened in the US, has been far less of a thing in Australia. And all judges in Australia are appointed (both state and federal), and the process is mostly insulated from politics, so Australian judges are far less afraid to offend public opinion
Is there some kind of theory of insurance they teach in business class where they explain this "discover the network" idea? It doesn't sound like the common definition of insurance at all.
I believe the perfect information case you say wouldn't happen is exactly what would happen. The only reason we have insurance is that perfect information is impossible in a chaotic world.
My home insurance offer free pest-control, because they know that if this is neglected, it will cost a lot more for them. Plus, it will be hard to prove that it was a cause of the home owners neglect.
At the risk of getting political, (governmental) healthcare is another one, where regular checkups can save you thousands in repair. It might look like a subsidy but in the end it becomes a net-benefit for everyone in the pool.
> At the risk of getting political, (governmental) healthcare is another one, where regular checkups can save you thousands in repair. It might look like a subsidy but in the end it becomes a net-benefit for everyone in the pool.
This is part of the theory behind the Affordable Care Act and its subsidies, in that the more people who have health insurance, the bigger and more diverse the pool, it becomes a win-win-win for insurers (bigger pool = good, more money, more customers, more profit) consumers (health insurance = healthier, better life) and the government and country overall (healthy population = better long term prospects for the country).
Of course, true universal healthcare programmes like the NHS simply abstract that away by removing the profit incentive entirely, cutting the insurers out of the equation and turning it into a more straightforward "the government pays for healthcare because a sick population is just a plain bad thing". It's as such not really a "risk pool" or "insurance" in any real sense, because the amount you pay into the system is completely disconnected from your risk of drawing out of it (and indeed, given the correlation of poor health and low income, likely inversely proportional).
The risk of being sued is very different though.
What does the data say? Which is more dangerous, trampolines or bathrooms?
I've known a few people who have hurt themselves in the bathroom, but I dont know anyone who has hurt themselves on a trampoline.
If you don’t sell at break even, it’s not a martingale, so the Law doesn’t apply.
Reminds of the guy who lost his keys in the darkness and was looking for the keys under the lamp because that's where he can see. Likewise, you're using your tools and hoping that the tools have some connection to real life.
You sound like one of those "that's all good in practice but it would never work in theory" type of people.
But if your business goes bankrupt with probability 100% with even a simplified mathematical model, I wouldn't want to invest in it.
If someone is borderline on this, it's fine if the court steps in to give him some slack.
But the defense in the case under consideration was not lack of mental acuity, unclear legalese, ambiguity, coercion, or power imbalance.
It was "didn't read the contract".
A person with borderline intellectual functioning can absolutely have capacity to understand a contract sufficiently to agree with it when its terms are explained to them in clear plain English, yet lack the same capacity when they are presented in dense legalese. Legal doctrines of "capacity" tend not to deal with that situation very well, because they focus on the capabilities of one of the parties rather than the form in which the contract is presented. Also, a lot of people with mild cognitive issues (not just borderline IQ, also other issues like age-related cognitive decline, early stage dementia, early stage hepatic encephalopathy, etc) are unaware of those issues, in denial about them, or too ashamed to admit them, so may not benefit from legal rules designed to apply to them specifically, whereas they can stand to benefit from legal rules (like demanding unexpected clauses to be stated prominently to be enforceable) designed to apply to everybody.
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.
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?
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.
However, that just circles back to few people asking what their insurance company might think.
The big damages are punitive damages, not damages for compensation. Since we have rather lax consumer protection laws we rely on the companies being afraid of having to deal with a huge lawsuit payout if they act suitably antisocial. Like the McDonalds hot coffee lady only asked for medical bills, but because McDonalds corporate refused to give her those, and continued to keep coffee boiling hot regardless of people getting injured that they knew happened constantly, because it made them money, the jury made it a point to award a ludicrous judgement to teach them a lesson.
For example, in the 2014 Florida case Cynthia Robinson v. R.J. Reynolds Tobacco Company, et al, the jury awarded US$23.6 billion in punitive damages as well as US$16.9 million in compensatory damages, for the death of the plaintiff's husband, a smoker who died from lung cancer at the age of 36. I'm sceptical any Australian judge would ever award US$16.9 million (at current exchange rates, AU$25.7 million) compensatory damages for a single person's death. The trial judge cut back the astronomical punitive damages award, but left the compensatory award intact. In the end, the plaintiff never got any of that money (the appeals court ordered a retrial, on grounds unrelated to the damages, and the defendant prevailed at the second trial). Still, I think it goes to show, it is not just high punitive damages, high compensatory damages is an issue too.
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.
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.
For example, compare how the UK and the US handle compensation for lost future earnings in wrongful death cases. In the UK, judges are guided by the "Ogden tables", actuarial tables published by the British government. The judge will use the deceased's age to look up a multiplier in the tables, which will be multiplied by their income at the time of death, to derive a net present value of future earnings. While the tables are technically only a guideline, and judges have the discretion to deviate from them, plaintiffs rarely succeed in practice with convincing judges to do so.
By contrast, in the US, there are no such formal guidelines – it is largely determined by expert witness testimony before a jury. Expert witnesses have a lot of scope to argue for higher estimates, and often succeed in convincing a jury with those arguments. The result is unsurprising – compensation for lost future earnings is more generous in the US than in the UK.
http://ndl.ethernet.edu.et/bitstream/123456789/28878/1/53.pd...
Are you trying to say that one system is bad and another is good? They are different for different reasons, which can be explained by the structure of the society and what we expect courts to provide for us as opposed to other areas of government or private parties.
The argument though is, a lot of the difference is nothing to do with the factors you cite such as social safety nets, it is about the use of juries in civil cases, especially to decide damages. David Bernstein (professor of law at George Mason University) puts the argument better than I can in a 1996 journal article – https://www.cato.org/sites/cato.org/files/serials/files/regu... – see in particular the discussion of juries on PDF pages 3 onwards, and his recommendation on PDF page 6 that state legislatures should remove the power to decide damages from juries and transfer it to judges only
Why are you arguing this? For what purpose would it serve to give up the right to a jury trial in order to mitigate the extreme outlier cases which bump up the averages and which do not actually get any money into the hands of the plaintiffs? You want to destroy a constitutional right because... the tobacco industry got an unfair award, or because you think people are too dumb and swayed too easily by lawyers that we can let them decide life or death but can't let them decide how much money someone is owed?
Why take this position? What justice is it serving and why would society be better off for doing it?
Because I'm interested in comparative law and the differences between the legal systems of different countries, and my honest opinion is this is a matter in which the US system is worse than that of the other major English-speaking countries.
I can also point to examples of the opposite, where I think the US system does it better – e.g. the abolition of the dock.
> For what purpose would it serve to give up the right to a jury trial in order to mitigate the extreme outlier cases which bump up the averages and which do not actually get any money into the hands of the plaintiffs?
Bernstein's primary argument isn't about outliers, it is about predictability and consistency – judges are much more consistent in the damages they award than juries are. Where juries are in charge of damages, it can turn into a lottery, where some successful plaintiffs win big, and others win small, just based on the luck of the jury pool draw. He argues that's unfair to those less lucky successful plaintiffs, and I think he is correct there. Of course, there can be a similar phenomena with random selection of trial judges, but the variability due to different judges tends to be significantly smaller than the variability due to different juries, since judges are subject to pressures for consistency which do not exist for juries
> You want to destroy a constitutional right because...
Under US constitutional law as it stands, there is no federal constitutional right to a jury trial for civil cases in state courts. The 7th Amendment right to jury trials in civil suits only applies federally, it has not been incorporated against the states under the 14th Amendment. This is unlike the 6th Amendment right to jury trials in criminal cases, which has been incorporated under the 14th (except for the vicinage clause). The piecemeal application of the incorporation doctrine seems rather arbitrary and difficult to rationally justify, but that's SCOTUS precedent as it stands.
Some state constitutions have a state constitutional right to civil jury trials, others don't. For those that don't, there would be no constitutional obstacle to a state legislature implementing Bernstein's proposal to remove damages decisions from juries and shift them to the judge–which is already the norm in every other major English-speaking country. As to those states who do have such a state constitutional right, whether Bernstein's proposal would be compatible with it depends on precisely how that right is worded, and how the state courts choose to interpret those words.
> you think people are too dumb and swayed too easily by lawyers that we can let them decide life or death but can't let them decide how much money someone is owed?
I'm opposed to the death penalty so I don't believe any jury should be deciding life or death.
That said, criminal matters and civil matters are so different, it is rational to hold that juries should be required for one and not the other. Criminal matters are supposed to have a very high burden of proof (beyond a reasonable doubt), where requiring 12 ordinary people to make a unanimous decision can be viewed as an additional protection against wrongful convictions. Civil matters are decided on a much weaker standard (balance of probabilities), so it is not clear whether juries are as necessary for civil cases.