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Comment by ncmncm | Hacker News Reader

It is very helpful to know that this can work.

Insurance companies have unique regulatory requirements specifically because they used to do what Google does now: ghosting paid-up customers. In their case, many insurance companies welcomed regulation to maintain a level playing field. It would otherwise become too easy for some to collect premiums but not pay out obligations, and thereby be able to undercut more honest companies. But for this to work, state Attorneys General need to take enforcement seriously, and resist capture. California's Attorney General is elected, which helps there.

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Why is that unique to insurance? Taking money for a service and then not providing is just normal fraud, it's unclear why you'd need insurance-specific regulations for that beyond ordinary contract law.

Because people who need insurance are already suffering from a loss. Having to sue the insurance company for fraud would be just adding insult to injury, and would be unattainable for many people who cannot afford to open lawsuits. Pre-emptively putting mechanisms in place so you don't have to go to court to get your insurance claims handled makes insurance work with society.

The similarity is that you are insuring against a specific event with a lot of caveats. As a silly example, if you insure your house against fire damage and then light it on fire yourself intentionally, you're not getting anything. The insurance policy may not even cover accidental fire damage if it was due to your own negligence, e.g. operating an unsafe fireplace.

Given all these terms and stipulations, it's easy for the insurance company to say the policy doesn't cover the specific event that led to your loss, even if it should. Which is when you have to take them to court. So in the interest of keeping the insurance business an actual legitimate business people trust, you have oversight.

Yes, but that answer doesn't explain why anything insurance specific is needed. Courts can rule on contract disputes regardless of how complex they are.

Courts take a long time to rule on complex contract disputes. The whole point of insurance is that you need the money now, not years later, as was already explained nearby: <https://news.ycombinator.com/item?id=25902290>.

Insurance payouts delayed are insurance payouts denied.

There are Nash equilibria at many different points on the curve, but only a narrow range where the value proposition of insurance is appealing to potential customers. An Insurance Commission's job is to force it into the range where negligence and arson are not paid, but genuine misfortune is paid immediately.

You could make a time based argument like that for any contract dispute. "Payout delayed is payout denied" isn't true, but if it were then it'd mean all contracts were useless. So you aren't showing that there's something specific to insurance here that's special, and there are plenty of mechanisms to help people who aren't rich get justice (e.g. no win no fee arrangements).

If an insurance company is regularly stiffing people then it won't last long regardless of whether an insurance commission exists or not.

I.e, "All crooks will get their just desserts if we just wait long enough."

No, that's not what I'm saying. I'm saying that if you have a working mechanism for contract enforcement, then insurer specific mechanisms on top should be redundant. The replies arguing with this seem to mostly be arguing that contracts don't really work, at least in the USA. Contracts are a very general construct that really do need to work, and it'd make far more sense to make them more enforceable than set up hundreds of industry specific commissions to try and make every commercial dispute one between a company and the government.

Contracts where one party is incapable of getting the contract enforced are useless for that party. In the insurance case, an insured natural person may have lost the means to do so as a direct result of the event that leads to the insurance claim.

If you lose your family and house in a fire, with marginal savings, then you may not be able to afford a lawyer and your contract is useless in the truest sense of the word. Unlikely situation? Yes, but then, that's exactly what insurance is all about.

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