Insurance feels like the biggest scam in the history of the world. You are legally obligated to pay us for nothing, most of the time.
That’s exactly what they do. There are people getting paid millions of dollars to create software that does this.
Do you know how much money an insurance company can print if they can undercut the competition by selling a bunch of policies to people who won’t file a claim?
People pick insurance based on price, and if someone is selling you a cheaper policy because they know your roof is better, you’re going to buy it from them.
They win because you’ll pay a premium without filing a claim, and you win because you can have a cheaper policy. That’s how it works in the real world.
The point of them trying to quantify risk as accurately as possible is to be able to extract profit while also offering competitive rates.
It's the same as with any other company. They try and operate as efficiently as possible (ie. reduce costs) to try and make more profit, while competing on price.
That’s not an option in many cases. The first homeowner featured in the article is in rural Northern California. CA’s insurance regulator has been extremely restrictive about letting insurers raise rates, especially in that area, so her insurance premium was probably a fraction of the expected cost of insurance claims.
If bargaining power is asymmetric between the insurer and the buyer, then the extra information is used for additional price discrimination (eg. Its better for you if the picture is never taken regardless who you are).
So the question is: does the insurer or the insured have the bargaining power here? Competition helps, but is only one part of it.
Seeing that insurers seem very profitable in the US, a decent proxy for bargaining power, I'd argue this is a bad thing for the consumer.
That's exactly backwards. If you have better information than a competitor, you have an effective strategy to steal their lower-risk customers and still make a ton of money.
This absolutely will happen. And the rates for the higher-risk customers they are left with will absolutely go up.
And of course it's a practical requirement for anyone whose net worth is primarily in their home.
There's a few obvious exceptions, but plenty of insurance isn't required.
You're required to get homeowner's insurance if you have a mortgage, and you're required to have car insurance if you want to drive a car on public roads.
So the majority of Americans are forced to purchase at least one of these in order to live their normal lives, which makes demand inelastic.
It’s mostly your own governments fault if you can’t find a cheap policy, there are millions of people who will probably never have to file an insurance claim in their life making up for government decisions to insure people who wouldn’t normally be able to be insured because of poor decision making skills.
But that doesn't imply what you're saying unless the supplier has monopoly power, which they, by law, do not.