Thread

1. sib · 1790706977 · focus · HN ↗

   "Did you know that home insurers use aerial drones to study your rooftop? If the conditions signal neglect, they might cancel your coverage before an accident."

   While there are certainly some issues of concern in the article and the reviewed book, the above seems like exactly what insurance companies should be doing: pricing (or making available) coverage based upon risk.

   This is not much different from an auto insurance company raising your rates (or cancelling coverage) because you've received a number of speeding tickets, which implies increased future risk of loss.

   In fact, I received a letter from my homeowners insurance company a couple years ago stating that they would not renew our coverage due to conditions that they'd observed (clearly from aerial imagery) including overgrown bushes touching the walls of the house and some larger tree branches growing over the house.

   I had a landscaping company come and fix the issues, sent my own drone up to take new pictures, sent the company the pictures, and they agreed to continue coverage. And now my house has less future risk of damage. This seems like a win-win for both of us.

   1. darth_avocado · 1790712042 · focus · HN ↗

      > pricing (or making available) coverage based upon risk.

      The whole point of insurance is to manage risk by spreading it across all consumers. If my insurance rates go up based on my usage or individual risk factors, it’s just an elaborate money making scheme. It should be like “everyone has to pay x to get insurance to get covered and if the claims start going up, everyone has to pay more”.

      1. tzs · 1790785943 · focus · HN ↗

         Isn't the point of insurance to manage the large variation in time between your consecutive covered events?

         Suppose your house would cost $400k to rebuild if it got destroyed, and the average interval between things happening at your location that would destroy it is 1000 years.

         If those events happened regularly every 1000 years starting from the year you built the house then you could deal with this simply by setting aside $400 every year in a house rebuilding fund.

         But if those events occur more randomly, still averaging 1000 years apart but with a large variation, that doesn't work. If you want a 99.9% chance of your fund not going bankrupt and we assume covered events are normally distributed you need a very large fund.

         If you have 10000 houses still each being destroyed on average once every 1000 years, and contributing annually for each house the same amount as under the "everyone handles it themselves" scenario, then thanks to the Central Limit Theorem the size of the fund you need is way way way smaller than the combined sizes of all the funds when each house is handled separately.

         Note there is nothing in here that requires the same annual contribution for all houses. What is required is that the total annual contribution matches the total average annual loses.

         There may be good policy reasons for requiring some kinds of insurance to charge the same amount to everyone, or at least to group people into broad groups where everyone in the group gets charged the same.

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