Comment by wheels | Hacker News Reader

Comment by wheels | Hacker News Reader

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I understand the problems of setting a precedent.

I don't, actually. If the financial industry has taught us one thing, it's that you can insure anything.

Let's assume that this is a very rare occurrence and that the total cost of making this right (say, tops $100k?) can be amortized over the profit being generated. I have a hard time understanding how it'd be rocket surgery to get something in place to handle these cases, especially just after a $112 million cash infusion.

Everyone keeps bringing up fraud, but fraud is nothing new to insurance and there are centuries of practices established in that industry for dealing with such – i.e. it will happen, it can be minimized by establishing premiums, requiring police reports, and, again, amortizing the cost of fraud over the spread of valid commerce.

[Edit replying to parent's #2 edit]

Sure, this one needs to be out of pocket. Actually, it'd probably be easier for them to insure now since there's a data point for how often this will happen per x number of rentals. Handling one of these out of pocket can't be a biggie for a company with several orders of magnitude more cash in the bank. And with a multi-billion dollar valuation, there will be institutional insurers that will be willing to build up a risk profile for them and work out a policy to handle these these things in the future.

Seconded... have a basic excess so it is not worth claiming for your tv, price in a certain amount of fraud, and investigate large claims. It's just the usual insurance.

There would be plenty of large insurers happy to insure AirBnB (and the reinsurance would end up down the corridor from me).

AirBnb is illegal in some of the states (and when states/hotel industry/cities get a wind of this story, it will probably be illegal in all the states), so I doubt any legitimate insurance companies will be handling this affair.

Aside from hyperbole about their legality now or in the future...

The way I suspect a deal would be structured is that the institutional investor would not be insuring the homes of Airbnb's customers, but insuring Airbnb against claims, with a process of validating those claims that involved sending out a third party adjuster.

I have full confidence in the insurance industry's ability to find a way to finagle a deal of this sort if there are enough zeros behind the dollar sign.

Let alone apartment complexes. The one time I used Airbnb the person whose room I rented told me I could use all the facilities of the apartment complex for free (laundry, exercise rooms, pool, etc. etc.). I'm sure the folks managing the apt complex would love it if they knew that was going on...

That statement doesn't seem based in logic: it doesn't follow. Lots of things are illegal in different countries, but that doesn't stop legitimate businesses operating in countries where such things are legal. For example, online gambling is illegal in the US, but that doesn't stop legitimate (US-headquartered) credit card companies dealing with online gambling companies in the UK.

Also, if it were indeed the case that AirBnb is soon to be illegal, it would make more sense for insurance companies to sign them up: the risk of AirBnb being shut down ought to reduce the likelihood that they'll need to pay out.

>For example, online gambling is illegal in the US, but that doesn't stop legitimate (US-headquartered) credit card companies dealing with online gambling companies in the UK.

you're talking about the things you don't know about. The US processors can't legally process payments coded for gambling (some gambling operators code the transactions as "groceries", etc... - this is how the things still sometimes can fly under radar )

http://www.egrmagazine.com/news/514743/mastercard-crackdown-... :

"implementation of America’s Unlawful Internet Gambling Enforcement Act (UIGEA), which bans the facilitation of online gambling by payment companies."

You seem to have misread my analogy.

I'm talking about US headquartered companies like Visa and MasterCard processing transactions for UK customers of UK (and Irish) online gambling companies; I do know about this, not least because I have an account on paddypower.com funded from major credit card companies like Visa and MasterCard.

The analogy is with insurance companies dealing with a business which is not legal in some states. That should not stop them dealing with the business in states where it is legal.

U.S. insurers are heavily regulated by the states. They aren't going to get involved in a line of business that appears shaky or is crossways with the political tide.

legitimate insurance companies

Sounds like an oxymoron to me...

No, most insurance companies are perfectly legitimate. You are confusing 'legitimate' with 'morally sound'.

Which is not to say I agree that that would be an oxymoron. A 'morally sound free market' or 'morally sound unregulated capitalism': those are oxymorons, because there is no imperative that causes unbridled competition in free markets to lead to companies doing 'the right thing'. Which is why we need a government to regulate stuff. How much of a government is a different question: there's a difference between supporting libertarianism and supporting anarchism and not even the most staunch libertarian disagrees we need a government for some things.

Insurance companies are immoral?

My employer and I pay $7,500 a year for my health insurance. I developed a debilitating back condition which required over $150,000 in surgery and therapy. My cost? Less than $1,000.

A friend of the family was killed in a tragic accident. He left behind a wife with a long-term debilitating illness and 3 children. Several life insurance policies paid sufficient monies that they have the financial resources to live their lives.

I assume this reply was intended for my parent, because I was not arguing that companies were immoral.

I do argue that companies are essentially amoral: outside of governments, the only force working on them is the pressure to survive in the face of competition, using whatever means needed to achieve that goal. The only reason companies generally behave in morally acceptable ways is by government regulation. Without those, monopolies on drinking water, oil and other essentials would be acquired and enforced by companies with armies. But the net effect of the current state of affairs is that companies generally behave in morally acceptable ways.

Such an insurance would probably be pretty much impossible. If you get a legit HTBRAI ( house trashed by random asshole insurance ), you've automatically created a market where these HTBRAIs are priced, bought and sold. That means you are essentially gaming burglary. eg. if I buy 100 HTBRAIs in some dicey neighborhood and there's an incident, my contracts automatically go up in value. That's a huge incentive for crime/arson/burglary.

you're mistaking the insurance with risk swap contracts, options, CDS and the likes. The insurance is when you own the interest in the property subject to the risk you're insuring against and the limit of the insurance payment is generally the amount of the actual market value/damage/replacement cost to your interest in the property. Thus it is illegal to double(triple...) insure in order to receive double(triple...) insurance payment. I.e. owning a 100K house you can't get 10 insurances and receive 1M when your house is burnt. You also can't get an insurance for your neighbor's house.

What you can, if you find a dealer, is to buy a risk swap contract that will pay you the contracted amount in the case of some house burnt or some earthquake happens or some bonds go south. This isn't an insurance in the sense of regulated insurance business. In stocks it is called options, in mortgage bonds it is CDS.

"you're mistaking the insurance with risk swap contracts, options"

No I'm not. btw i trade options & risk swaps for a living, so I had a good laugh reading your mini tutorial on "this is called option, that is called CDS" :) Anyways, there's lots of holes in your explanation. For one, you say it is illegal to double-insure. Not true. It is illegal to double-dip, not double-insure. So you can get health insurance for yourself from your employer & simultaneously be covered by your spouse's employer - this is quite routine and legal, though frowned upon. What is illegal is to bill both the providers for your expenses. Another eg. you double-insure expensive realty, so if one insurance provider goes out of business, you don't have CP risk. But if there's damages to your house, you can recover losses from only one provider, not both.

As an aside, much of this is enforceable because insurance is such a heavily regulated industry, so you have centralized databases & its easy to check if you are double-insured, double-dipping & other edge cases. With HTBRAI, assuming such a thing ever comes into existence, you'd need a framework for all that regulation to fit in, which is what I'm skeptical about. airbnb is a fine service and they have a sound business model & a solid future - these insurance wrinkles will hopefully be ironed out in due course.

It's an interesting point, but I don't see why it would be any different from any of the usual insurances (car, house, etc). A market based on life insurance policies which then incentivizes assassinations is a chilling thought, and strikes me as analogous to your scenario, but I don't think such a thing happens, right?

You might be surprised - see this : http://www.bloomberg.com/news/2011-05-16/death-derivatives-e...

Other examples in the entertainment industry - say there exists insurance that your movie will earn a minimum revenue say 25 million usd. Your competitor simply buys those contracts and then trash talks your movie on the opening night ( by simply paying out bloggers and amateur journas some pittance sum of money ). Your movie tanks and so the contracts get exercised and your competitor makes a whole lot of money. So the next time around, you make a shitty movie to begin with. Then YOU buy the contracts, wait for your shitty movie to tank and cash in the contracts! This actually happens sometimes in Bollywood, though not in the exact fashion I described but in a more shady fashion.

Reminds of the plot of "The Producers". Sometimes real life can be stranger than fiction..

"Spring Time for Hitler" ... it's sure to be a "HIT"

When people are planning to murder their spouse, then sometimes pressure them to get a life insurance policy. It doesn't look good if the police notice this.

Don't such policies exist, though? Homeowners insurance and renters insurance typically have options to cover burglary. I would argue that the risk here is not people gaming things on the market side, but likely the traditional route of filing a false police report and making a fraudulent claim. Ideally there could be an extension on existing policies for people who are going to be offering their homes on services like airbnb.

Edit: I should have scanned the thread

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