Comment by SilasX | Hacker News Reader

Comment by SilasX | Hacker News Reader

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I get the logic, and I'm personally fine with this approach[1], but there's a tradeoff between privacy and non-freeloading (don't know the technical term). Some types of data collection are so "icky" that people prefer to tolerate free loaders, and this feeling is common enough not to cause the adverse selection problem that forces everyone to accept the loss of privacy or pay impossible rates.

Consider the extreme case: let's say technology allows an external observer to directly read your thoughts as they happen.[2] Hey, people that think worse things are riskier, so what's the problem if they get higher rates? If you don't want higher rates, don't think about cutting through traffic and running red lights!

I just hope no one breaches that database and learns what you think of Suzy...

[1] as a safe driver long resentful of the statistics of my demographic

[2] Because of the "control/choice" issue, assume there's a difference between deliberate and unchosen thoughts and the device only takes the former.

But again, thinking about doing something and actually doing it makes all the difference. You do not have 100% control over what your think. Sometimes you think about something and then decide whether to do it it not by predicting the possible outcomes. I swear i have thought about murdering several people, but of course i will never follow through. And I'm sure everybody does that. It's part of our critical thinking. We think of something and then weigh the pros and cons in our mind and then decide what to do.

See footnote [2], and the problem is that (as with driving styles) there may turn out to be a correlation between how often you think about murder and how often you do it, which can be used to calibrate insurance-risk premiums.

Sure, not every thought about murder leads to murder, and not every red light you run leads to an accident. But people that run more red lights have more accidents, and people who think about bad things more (let's posit) will do more bad things.

"Oh, you only think about murder 3 times a week? Discount!"

Still ready to let your thoughts about Suzy get archived on some hard drive?

All of that does not matter one bit to an insurer. If what you think (or what someone manages to measure of it) can be used to predict damages better than without the data, that allows the insurer to offer those with predicted lower risk a lower premium and thus gain them as customers. It doesn't matter that you possibly know that you would never follow through--if people who think about murdering other people on average are more likely to actually do so and they cannot distinguish between those who do follow through and you, it is rational for them to put you in the same category.

It's not freeloading. The WHOLE POINT of insurance is amortizing risk across a wider range to individuals. If you can correctly predict risk exactly for every single individual then the whole model is pointless.

The "whole point" of insurance does not require vastly different risk classes to be lumped together and pay the same premiums; just the opposite. Someone who is known to carry a higher risk but pays as if they had a lower risk, can reasonably be characterized as freeloading, and that is the sense in which I meant the term -- not the mere sense of "they made a claim".

(Imagine e.g. someone in Florida being rated for hurricane insurance on the mistaken assumption they lived in Kansas, or a cab driver rated as if the car was just used for a daily commute.)

That insight in no way contradicts the principle that a completely predictable event is not insurable, or that insurance allows distribution of the costs of an event across a class.

By that definition though, anyone who comes out "ahead" on their premium is a freeloader. Perhaps a less charged term is needed? Freeloading sounds like this person has done something morally wrong, when in fact that have just used insurance as it is meant to be used.

I've thought about this since my post, and I think a better term for the concept I intended, would be "risk assessment accuracy". That is, you can increase RAA, but at the cost of a loss of some privacy -- that's the dynamic I was describing.

But I still think it's fair to call someone a freeloader if they deliberately get mixed in with a low risk class while knowing they're higher risk.

Edit: And you're right, that in the case of perfect RAA, the concept of insurance breaks down because it means you know people either will or won't experience the insured event.

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