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Comment by daenz | Hacker News Reader

I wonder what the insurance payout is for this? And the tax write-offs. Is it that simple, financially, just on a larger scale? Or is the scale too big for normal processes.

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At Amazons scale the best thing might be to self insure. Remember insurance is paying a premium on assets to prevent an loss that you might not be able to re-raise capital for. At a large enough scale, there little point to paying the premium because that one warehouse of capital loss is a drop in the overall budget.

Yup, pretty sure they self-insure. Some big car rental companies also self-insure, because they are at the scale where they already have their own repair shops, and the premiums would be more expensive than just paying out the damages themselves (edit: and then they can sell their own insurance to renters!)

Pardon my ignorance, but what does it mean to self-insure? Does that just mean you have enough money on hand to cover the losses if it happens?

Yes, exactly. Actuaries are quite good at their jobs, which means the cumulative lifetime cost of insurance generally exceeds the (cost of covering a loss * the probability of that loss), so the only three good reasons to buy insurance are:

(1) you can't afford to cover the loss if it should occur (or maintaining/raising cash to cover it would be more expensive than the cost of insurance);

(2) the peace of mind from knowing you won't have to worry about raising cash to cover a loss (even if you could cover it) is worth the cost of insurance to you, even if it's a bad deal financially; or

(3) you know more than the insurance actuaries about your individual risk profile and have an edge (which is rare but can happen -- e.g., you know a specific product model is extraordinarily likely to fail and buy a cheap extended warranty for it).

The first is the best and primary reason to buy insurance, the other two are corner cases.

Is there any legal/procedural aspect to self-insuring, or is it just a placeholder for saying "we'll eat the costs" ?

I think it’s generally a phrase only used when it is a conscious decision or analysis for an area that generally already has insurance policys commonly written. Eg fire insurance for buildings and contents.

It’s possible to file for an exception to auto liability insurance by proving that you can cover any liability up to and including the state minimum for liability insurance coverage.

Generally, I would think there's paperwork/procedure/approvals required whenever the insurance protects more than just you.

Auto liability insurance is an example because it protects other drivers. Another example might be homeowner's insurance, which (if you have a loan) protects the lender too because the house is collateral.

Insurance does not remove liability from you personally. If you cause damage with your car, you are liable for it whether you are insured or not. The insurance is a private contract between you and the insurer where you basically agree to pay them a monthly amount and they agree to cover any losses you may be liable for (up to some pre-agreed limit). But the liability is not theirs, it is yours, and if the damages exceed your coverage limit, you are responsible for the difference.

There will be a salvage company to carry away anything worthwhile, possibly paying Amazon pennies per pound. Some of the salvage will end up at salvage bid yards or flea markets.

> Some of the salvage will end up at salvage bid yards or flea markets.

Or back on amazon, under the different name

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