Allstate used GasBuddy and other apps to track driving behavior: lawsuit
arstechnica.com
arstechnica.com
Seems like the bigger part of the story is at the bottom. You can uninstall GasBuddy from your phone but finding and buying a new car that doesn't track you is a bigger hassle.
https://foundation.mozilla.org/en/blog/privacy-nightmare-on-...
>Mozilla’s latest edition of Privacy Not Included reveals how 25 major car brands collect and share deeply personal data, including sexual activity, facial expressions, and genetic and health information
and if it's in the car it's Internet connected now.
Assuming pedestrian and children’s safety is a priority.
Isn’t one of the most common ruminations of modern society that children cannot roam freely due to excess risk of being hurt or killed by a distracted driver?
https://www.consumeraffairs.com/news/these-vehicles-may-pose...
>IIHS says pedestrian crash deaths have risen 80% since hitting their low in 2009. The statistics show that 2021 was almost as deadly to people on foot as last year. Nearly 7,400 walkers — more than 20 people a day — lost their lives in 2021 after being struck by a vehicle.
Airline pilots get recorded, why shouldn’t drivers?
AFAIK, general aviation pilots are not recorded. Black boxes are only a thing in commercial aviation, so a more appropriate analogy would be the recording of bus or semi-truck drivers.
Regardless, what is and is not required of all pilots is beside the point. The point is society implements a safety/accountability measure to prevent x rate of injuries/deaths…but society does not implement the same safety/accountability measure to prevent y rate of injuries/deaths where y is far greater than x.
The discrepancy is because it is politically unpopular to hold the people causing the larger rate of injury accountable (voters who drive personal cars), whereas it is politically popular to hold the people causing a smaller rate of injury accountable (commercial pilots).
> Why wouldn’t I think of children?
The g-parent describes a narrative that is designed to seed an untrue notion that no one is thinking of the children.
It really isn’t a priority (in the US anyhow) otherwise we’d have far more and far better public transportation.
How do they triangulate that from car telemetry?...blood pressure/heart rate signatures from face? Suspension rocking in a park at night? Maybe they pull it from your phone.
I don't trust the manufacturers, but Kia seems to have said they have the right to collect sex info, but haven't. [0]
> “To clarify, Kia does not and has never collected “sex life or sexual orientation” information from vehicles or consumers in the context of providing the Kia Connect Services.”
[0] https://nypost.com/2023/09/06/nissan-kia-collect-data-about-...
It's not a camera in the bedroom but you can pretty easily extract relationship graphs from geolocation tracking and proximity. US intelligence agencies have been doing it in the middle east for ages...
It's all spelled out in an 4pt light grey font that you clicked through without reading. So it's your fault we know you're pregnant before you do.
> Several car brands also note that it is a driver’s responsibility to tell passengers about the vehicle's privacy policies.
"Hey Bill, before we go to lunch, gloss over my Nissan's EULA."
I think I might start buying older cars and just swapping out the engine instead of putting up with the telemetry. If the car has a SIM card, I don't want it.
Third-party service providers: We may share your Personal Information with third-party service providers that we contract with to provide you with the Mazda Connected Services, as detailed in this Connectivity Privacy Statement.
The Artity (allstate) SDK offers some utility like "fuel efficiency tips", but it is a cover to collect data.
It is intensely frustrating that you need to be an aero embedded remote sensing SWE to defeat all this bullshit though. It used to be that having a basic knowledge of javascript was sufficient.
Yah yah insurance reduces risks instead of adding it like gambling, but the analogies are still there.
It’s just a thought experiment, but the more information they have on us, the more relevant it becomes.
Perfect information means they know your risk level to the best possible accuracy, which would really only apply to populations.
Perfect information means they insure 1000 people and predict they’ll have one bad accident per year. After ten years they covered for ten accidents. All ten could have occurred in the first year and they would still be correct.
That’s why it’s a thought experiment, and not real life.
> Perfect information means…
No, that’s not what was meant by perfect information in this instance.
It’s hyperbole of sorts, but it highlights that until such a time, raising the cost of insurance doesn’t just punish the people who actually cause the damage.
The personal risk component can be accounted by “perfect” information and that component can get bigger or smaller depending on your definition of perfect, but there’s another component which can’t.
Maybe you could argue you shouldn’t have to cover medical expenses if we had a single payer system—the money to mitigate medical risk from driving still has to come from somewhere.
Maybe you could argue that damage to property should come from those property owners’ insurance.
What if you don’t get into a terrible accident, you just get into a boring accident where you total your car and don’t hurt anyone. You know the odds of this are low, chances are it won’t happen in your life, but it will probably happen to someone you know. What if it happens to you, when you’re very young and have a new car? You haven’t had a chance to put away any money in your piggy bank yet. You need to replace your car now. How does a piggy bank help you?
You buy insurance if there is an uncertain outcome, e.g. a 1% probability of having a $100k claim. In which case you can expect to be charged around 1% of $100k (plus admin costs and whatnot).
Perfect information means you know the exact probability of the event happening. It doesn't mean that you know with certainty whether an event will happen or not. That would require a crystal ball or a time machine.
The pay-as-you-drive model might paint a picture of a more equal playing field, where everyone pays what they are due, but I think it is mostly a sham to squeeze more money out of people.
The truth is insurance agencies always want to find a reason to increase your premiums, because the law says you can't just increase the premiums for no reason. Most premiums are lower than what it "needs" to be, so if they find an excuse, they will jack up the premiums.
How does this work? Are you saying all the insurance companies share data and collude to set your rate? Or they just hope you don't price shop every year or two and jump to an offering that is under the legal limit (whatever that is)? My state has over 50 auto insurance companies, so I don't see why they would have to resort to tricks like that to increase your rate in an unfair way.
Insurance companies have actuaries to classify risk. They're not asking armchair drivers on hacker news to determine what is dangerous or not.
What prevents one company from defecting and taking all the market share?
Insurance companies do in fact compete on rates.
Swerving to avoid road debris or hard braking to avoid a deer as examples of what have cost commercial drivers jobs.
Look at the CDL world for a view into this.
I have 30 years of clean driving records BTW, so not trying to justify risky driving BTW
The future world will become more and more brittle/brutal for us randos because we are 100% disposable in the future tech bro libertarian dystopia. If any situation puts us outside their standard use cases and automated support systems ability to resolve issues we are purged from the system. And when all of society is manage by those types of systems you are hit.
Minor nit: I expect someone driving in a suburb to pay more in premiums because...deer can't sue you.
While reducing speed when you see deer is important, you won't see the one you hit.
In my case it jumped over a road barrier from below, it would have been impossible to see.
But human perception is limited, the best drivers I know (not including myself in this) respect their limits.
Urban areas have higher rates because there tend to be more conflicts, it is just mathematics.
Pedestrians, dogs, etc.. all work as replacements for deer above.
"Won't see it?"
You can't argue that all else equal, driving during the day is as likely to hit a pronghorn as driving at night. Not calling you a liar, but I'm skeptical.
Mine happened on a lunch break, can't see through rock either.
But you only see a fraction of the wildlife that is there. If your sole stratagy is to see them you may be surprised how many deer hit the sides of cars.
Complacency and selective attention are very real human problems.
The classic basketball game example of selective attention if you don't buy it.
They're probably right because the average includes a lot of people who chronically create carnage like drunks, teenagers and that old woman everyone has in their extended family who swears she's a good because she managed to not be found responsible for the dozen accidents she's been in.
Now, if 90% of people said they were better than median that would be concerning.
I think they key sticking points are 1) Why isnt aggregate claim data good enough for this purpose? 2) Do we prefer erroneous risk estimation from bad personal profiles over erroneous risk estimation from group averages.
My sister lives in a dense area of a major city and sees pest deer every day.
When your kid runs in the road. Do you want the to avoid an accident, or do you want to optimize for them just turning enough so they don't lose their insurance.
When traffic ahead of you makes an emergency stop, do you want the person behind you at a safe distance to error on stopping earlier or do you want to add an incentive to just stop right before your bumper?
There is a reason emergency braking is a popular feature. Humans tend to no apply brakes early or hard enough, even when no distracted.
Otherwise safe drivers are punished also because it isn't a reliable metric, so the actuaries know that they can't tell crash avoidance from risky behavior.
If you know about training fleets and semis, you can see these new drivers taking risks that they should not be taking.
Give it a decade and a lot lost or shattered lives and I would guess these will either abandoned or not supported by the reinsurance industry. Possibly just being another source of income to the companies to sell to data brokers.
I hate insurances and their hidden shenanigany-like algorithms but at the end it is a fair game I when you look at the big picture.
I never owned a car but I feel deeply concerned as I use the road by foot, bike and rentals and am often scared by the drivers usage of the road. You know : texting, updating gps, driving full speed in turns without visibility, taking over as Schumacher in the last lap… I’m mean yes it’s safe for the other ones in bigger cars and themselves until no deer encounter.
The speed limit is a LIMIT not a requirement. And don’t start me with "you’re dangerous driving so slow" lol.
There are many places that have minimum speed limits as well.
It certainly is. Speed differential is a huge cause of serious accidents. That can be driving too fast or too slow. Many roads have minimum speeds, and as a commuting cyclist I can tell you the biggest threat is not being able to move with the general flow of traffic.
I'm also not sure how you came up with driving slower and smooth breaking being correlated, especially if you do limited driving.
> slower and smooth breaking being correlated
The energy of a moving object is proportional to the square of the speed, but your braving force is constant. If you want to decelerate from Xkm.h to 0km.h before the deer at 100m ahead, you’ll have a smoother stop if you drive slower. And that don’t even take reaction time into account.
> especially if you do limited driving.
Limited on a daily basis but it’s been 20 years I learned to drive and do it regularly for occasions like week ends, road trips, helping parents, going to buy heavy appliances etc… also riding a bicycle share many thinks with driving a car, a truc or a motorcycle.
But after traffic analysis by engineers, the final number is set by politicians.
In terms of its benefits, at least in Canada, it saves me a bunch of dough on gas. Highly recommended.
Though I like the French approach where gas prices are all on a government website without needing to depend on crowd-sourcing: https://www.prix-carburants.gouv.fr/
I’m more worried about a navigation app spying on me.
There’s about a 13% difference between the cheapest and most expensive at the moment.
Or forget it all and go straight to Costco.
No way, I value my time tyvm.
At locations near me, I swear one spouse goes in to shop for 2h while the other waits in line for gas for as much of that 2h as they can.
For various personal reasons I haven't been driving a ton lately, so I'll pick a more typical month.
My direct discounts were $17.88 in that month on gasoline that was priced at $269.49, at a cost of $9.99, for a total savings of $7.89.
Plus whatever extra I might have paid if I didn't use GasBuddy at all to help with planning to buy gas where the price at the pump is cheapest (which anyone can do without a subscription or installing an app). The potential savings gained by being very selective of where I buy gas, using information provided by GasBuddy, is impossible for me to tabulate.
If I had to guess, then I would guess that being selective saves me an average of around 10%. So, about $27 in my example month.
(I do not participate in any of GasBuddy's drive-tracking programs, and it only knows my location when the app is open. Drive tracking is a thing they offer people to opt into (for "free") but I could see the writing on the wall with that, vis-a-vis this Allstate incident.)
Presumably without asking whether they were a passenger at the time. Meaning that people who carpool are penalized by this practice...
My time was worth more than the savings they offered. In fact, it was insulting.
I should not have to spend 3 hours per month categorizing my trips for their data mining expedition for a $30 discount (especially not one that evaporated at the next renewal, because I wasn't safe enough). That app was rigged.
The TOS for both services disclose selling my driving information to 3rd parties including insurance companies and law enforcement.
So I'm effectively being punished by Mazda for not submitting to their data harvesting scam.
If insurance is legally required, it should also be legally required to be non-profit and government run.
I'm curious as to whether Apple's granular privacy model is more effective than Android.
People say this but it's not true. Bad drivers have higher premiums, and no one is subsidizing them.
It does make sense for good drivers to share, but only if they have opted in.
The whole point of insurance is it's a shared risk pool. Arguments like "Bad drivers make YOUR rates go up" just serve to pit customer vs. customer while insurance companies profit.
But, if the expected time to an insurance payout for a good driver is longer than their life time, then good drivers will never have enough money in their account to cover an accident that occurs.
Suppose the insurance thinks that Alice has a 90% probability of an accident and Carol has a 15% probability, so they want to charge Alice six times the premiums of Carol. Then in practice Carol is the one who has the accident and not Alice, because it's not perfect.
But the pool Alice is in is much smaller than the other one, so if they were merged, the combined group would only be paying 10% more than Carol does, which would be serving the purpose of insurance -- spreading risk. Whereas if you separate them, Alice is screwed -- even though she isn't even going to have an accident -- because now she has to pay >$7000/year in insurance rather than ~$1300 when you combine these imperfect predictions with smaller risk pools.
I think there are a few problems:
1. The opt in should have been much clearer, and probably should have been a real option not just all or nothing.
2. However, anyone who opts out will have more expensive insurance
3. Which means you have to share data that feels very personal, or be treated like a 2nd class citizen - which feels very icky.
4. Companies are sensitive to customers telling them they are icky, at least until customers get de-sensitized to the ickyness.
First, that the way the insurance company uses the data is accurate. For example, if you work nights, noticing that you drive at night might cause them to raise your rates, because more of the people who drive at night are drunk. You're not drunk, you're just commuting, but now you're getting punished for giving them data.
Second, that you know what "well-behaved" is, because people who know they're being tracked will try to conform to what they think will give them a better score. So now you're focusing your attention on strictly adhering to some mental model of what you think the tracking device wants to see in order to lower your rates instead of leaving that attention to focus on actual hazards. Then you end up having to brake rapidly because you notice an actual hazard too late, which makes the tracking device penalize you more than all of your machinations were helping, or even causes you to get into a collision.
I would like to see evidence of this.
My experience: discount for sharing is low, maybe $100/year.
My expectation: if I actually get in an accident (1) the data I shared will be used against me; (2) my insurance provider will put me in a high risk pool or drop me.
It seems to me that the downside is really high and the upside is not.
Is that wrong?
P.S. If I actually had faith in all of the companies involved, I would certainly agree with the parent. However, I don't.
Rest of your analysis seems spot on. Important to note however that getting in accidents already increases your premiums - I don't really think the data sharing is gonna change that much.
I guess that's why Walgreen's has all their items locked down. Because the shoplifters shoplift irrespective of consequences.
How can you correlate a Life360 or GasBuddy user with an Allstate subscriber with any level of certainty?
Allstate, for example, is billions of dollars in the hole on paying out claims for the past decade. Most insurance companies are.
Edit: I'm talking about underwriting losses. Selling insurance and paying claims is a sort of loss leader for the insurance industry. Insurance companies are net losers on paying out claims, but they make enough back by investing the premiums before claims have to get paid, that it is still a net profitable business.
Essentially insurance companies are loaned money by their customers since they are selling a promise of future payment on claims. They invest this pool of money and keep the gains until it is time to pay out on claims. Many companies (like allstate) pay out more in claims than they collect in premiums. For 2022 and 2023 they paid out 5 billion more in claims than they took in in premiums. Those were pretty bad years, but over the long run, just about every insurance company loses money this way.
Look at their financial reports if you don't believe me: https://www.allstateinvestors.com/static-files/d61a8007-647a...
Additional Edit: this comment is particular to the big property and casualty insurance products (home and car insurance on the consumer side). Best Buy extended warranties, health insurance, and other products may have business models that rhyme, but that don't follow this exact fact pattern.
Page 2 has their premiums collected and their claims paid. They are down 5 billion in 2022 and 2023. Haven't seen the full results for 2024 yet.
For an explanation of why, Warren Buffets letters to investors explain the insurance industry as a whole pretty well (page 7): https://www.berkshirehathaway.com/letters/2013ltr.pdf
Pretty consistently, the industry as a whole loses money on policies.
https://www.macrotrends.net/stocks/charts/ALL/allstate/net-i...
If you look at their financial statements you can see that they have been losing billions on underwriting for years https://www.allstateinvestors.com/static-files/d61a8007-647a...
$10-20B profit annually is not something I'd describe as "in the hole". The "hole" is overflowing with money.
If you invest that $95, get a $15 dollar return, and then deliver the $100 product, you have made a net profit even though you sold the product for below cost. You are still in the hole for the insurance product no matter how you slice it.
Yes, I get that the insurance product is what allows them to invest the float. But any accountant can tell you that they are in the hole on that product.
They are still selling the product at a loss, even if their time arbitrage lets them make money elsewhere. Its kind of magic in that its a win/win scenario in what looks like a zero sum game. The point is that people think that insurance companies make money off of them paying a premium higher than what they will recover in claims, and saying that insurance is always a bad deal for the consumer. My point is that isn't true. Insurance companies pay out more in underwriting costs than they collect in premiums. Insurance is very frequently and insanely good deal in aggregate.
Is it analogous to interest in household checking account where income = bills, or is it analogous to the same household with a large retirement account that sweeps the checking and pays bills.
Maybe another way of asking this is whats the relative size of the interest bearing investments to the annual premium collection.
Can you show me where this is listed in the allstate financial results?
https://www.allstateinvestors.com/static-files/d61a8007-647a...
It is hardly a coincidence that their unearned premiums + claim payment reserve happens to be roughly the amount they have invested ($65b and $66b respectively).
Warren Buffets letters to investors explain the insurance industry, and the float, as a whole pretty well (page 7): https://www.berkshirehathaway.com/letters/2013ltr.pdf
This is all right, I still don't see how the insurance business unit add value unless there are profitable years on average.
I'll have to check out the letters, maybe they will explain this.
Edit: Having read that section of the letter, my understanding is the existence of insurance companies relies on the belief that in the long run, the insurance side will not be a loss leader, at least for insurance types without a significant time lag between customer acquisition and insurance payout. For example, operating a "loss leader" could be profitable for something like life insurance where there average claim for a new customer is in the future.
It seems like insurance types where there is no intrinsic time delay between customer acquisition and payout (e.g. auto, home) can not operate this way. That is to say, you cant build up a profitable interest bearing float if average policy payouts are >100% in month 1 of the policy.
Would you agree with this description?
Let's use an example: If an insurance company has $66 billion in premiums collected, they know they'll likely need to pay out about $66 billion in claims over the coming years. Instead of letting this money sit idle in a bank account, they invest it.
This is where the two sides of an insurance company come into play:
- The underwriting side (selling insurance policies) collects premiums
- The investment side uses these premiums as capital to make investments
It's similar to a loan system, but with a twist. When customers pay premiums, they're essentially "lending" money to the insurance company. This "loan" only gets "repaid" when the customer files a claim. Meanwhile, the insurance company invests the premium money. While they eventually have to pay out claims (repay the "loan"), they get to keep all the investment profits they made.
This explains why insurance companies often continue selling insurance even if they lose a small amount on the underwriting side - it's like getting a very cheap loan. Historical data shows insurance companies lose about 1.5% per year on underwriting. That's their effective borrowing cost, which is much cheaper than other forms of borrowing.
Why don't they just raise prices to make both underwriting and investments profitable? Because insurance is highly price-competitive. Customers will quickly switch companies for a better rate. If Company A tries to make a 2.5% profit on underwriting, while Company B is willing to lose 2.5%, Company B's prices will be 5% lower - and they'll attract more customers, giving them more premium money to invest.
Think of it like a water tank: - The tank contains 66B gallons (total liabilities) - 30B gallons flow in annually (new premiums) - 30B gallons flow out annually (claim payments) - The tank stays at 66B gallons (stable liability pool)
Even though the annual inflow equals the outflow (30B), it would still take about 2.2 years to drain the entire tank (66B/30B = 2.2) if you stopped adding new water. This is the average time delay.
The matching of annual inflows and outflows just means the system is in steady state; it doesn't affect the average duration of how long money stays in the system. That duration is determined by: - Total liability pool ($66B) divided by - Annual payout rate ($30B)
Another way to think about it: - Each premium dollar collected today is promised against future claims - Those future claims are spread out over the next several years - Even as old claims are paid, new premiums create new future obligations - The ratio of total obligations to annual payments (66/30) determines the average delay
So while the annual cash flows may match, the time delay is a structural feature of how insurance obligations are spread out over time. The matching of annual inflows and outflows maintains the system's stability but doesn't eliminate the time delay inherent in the insurance model.
It is intrinsic to the nature of insurance that there is a time delay. Even if the insured were to suffer a loss on the same day that they paid their premium, there will still be a delay. Even the most efficient, benevolent insurance operation cannot process a claim, value a loss, and settle the claim within a day.
I get how even an immediate claim takes time to settle.
Would you agree that this puts an upper limit on the loss they can run? If more aggregate auto claims are submitted than premiums paid in a day, you can only make interest on they delay duration. If payout delay is say 3 months, annual interest is 4%, you break even at a 1% loss on premiums, right?
If you are consistently drawing down your float to pay claims instead of adding to it, you are better off leaving the auto insurance industry and simply operating an equity investment firm.
Of course there is an upper limit on losses they can run. The upper limit is base on their investment returns and the time frame. The time frame is longer than you think. Based on a quick run of the numbers it is measured in years.
> If you are consistently drawing down your float to pay claims instead of adding to it, you are better off leaving the auto insurance industry and simply operating an equity investment firm.
They are continually replenishing the float at the same time. The whole point is that they are operating an equity investment firm, except the investment capital comes from a revolving pool of insurance premiums instead of some other pool of money.
If daily claims meet or exceed the daily premium, the only time available to earn interest is between premium receipt and claim payment.
Imagine founding an insurance company and on day one you receive $100 in premiums and $100 in claims.
But it is still true, unless I'm forbidden from making my own investments.
Their combined ratios (insurance payouts + expenses / premiums collected) are closely tracked by investors and if they're creeping up to 100% without a systemic reason that affects all InsuranceCos, they get a lot of scrutiny.
Here's just one lens [0] for home insurance going back to 2004 (~20 years). It appears that the combined ratios were under 100% for ~8 years.
[0] https://www.spglobal.com/marketintelligence/en/news-insights...
For the other 12 years they were over. 60% of the years were losses.
The average is 101.535 for all years in your source. So over 20 years their costs were $101.53 for every $100 in premiums collected.
I didn't say that they ALWAYS post losses, I said that it is very common, and that insurance premiums are a net money loser for the industry.
This is just another source proving that out, unless I'm missing something?
>Selling insurance and paying claims is a sort of loss leader for the insurance industry.
Now you say
> I didn't say that they ALWAYS post losses
And
> that insurance premiums are a net money loser for the industry.
This is circular. As for the article, it shows the context that the last couple years have been exceptional and core operations aren't sustainable.
Your reasoning doesn't explain why these companies are cutting coverage, skyrocketing premiums, and leaving markets. They wouldn't be retrenching if the status quo was absorbing losses.
> In 2023, insurers lost money on homeowners coverage in 18 states, more than a third of the country, according to a New York Times analysis of newly available financial data. That’s up from 12 states five years ago, and eight states in 2013. The result is that insurance companies are raising premiums by as much as 50% or more, cutting back on coverage or leaving entire states altogether. Nationally, over the last decade, insurers paid out more in claims than they received in premiums, according to the ratings firm Moody’s, and those losses are increasing. [0]
[0] https://www.wlrn.org/business/2024-05-27/as-insurers-around-...
Insurance companies are indeed leaving certain markets and raising premiums dramatically, but this is happening because:
1. Climate Change Risk Unpredictability
* Traditional insurance models rely on being able to predict risk with reasonable accuracy
* Climate change is making weather-related disasters more frequent and severe
* Historical data becomes less reliable for predicting future losses
* This uncertainty makes it impossible to price policies appropriately
2. Regulatory Constraints
* State regulators often limit how much insurers can charge for coverage
* Companies can't price premiums high enough to cover increasing risks
* They're forced to choose between unsustainable losses or market exit
* Political pressure often prevents charging actuarially sound rates
3. Concentration of Risk
* Some areas face multiple overlapping risks (fire, flood, hurricane)
* Large-scale disasters can trigger many claims simultaneously
* This violates the insurance principle of risk diversification
* Even investment returns can't offset such concentrated losses
4. Scale of Potential Losses
* Traditional model accepts small predictable underwriting losses
* Current climate risks create potential for catastrophic losses
* Example: California wildfires can destroy entire communities at once
* No amount of investment income can offset such massive losses
5. Market Structure Issues
* Some markets require insurers to take all risks (can't be selective)
* Cross-subsidization between markets becoming unsustainable
* State-specific regulations creating fragmented markets
* Limited ability to diversify within regulated markets
While the traditional insurance model can handle planned small underwriting losses offset by investment gains, that model breaks down when facing large-scale unpredictable risks that can't be properly priced or diversified. This explains why insurers are withdrawing from certain markets while still operating profitably in others.
I've yet to see a capital markets discussion with an InsuranceCo where someone says, "Oh! Your combined ratio under normal conditions is at/over 100%. Good job management team!" Please provide some sources supporting combined ratios >= 100% as OK/sustainable, or this will continue to be circular.
> Insurance companies are indeed leaving certain markets and raising premiums dramatically, but this is happening because...
Dude, your #1-5 just listed reasons why the core insurance operations have to be profitable, or they cease operations. That's making my point. You made no reference to their investing activities overcoming losses as you implied. If they can't price risk effectively in their core business "under normal conditions," then they will get competed out of the market.
Dude, your source shows that over a multi-decade time-span the industry loses underwriting money more often than it makes money (12/20 years), and if you tally it out in the long run, they are net negative (101.5 dollars paid per 100 in premium income). https://www.spglobal.com/marketintelligence/en/news-insights...
Of course they aren't going to congratulate themselves on losing money on underwriting in those words. The way you will see it phrased is congratulating themselves on increased premium income from sales, while elsewhere in the report acknowledging underwriting losses. Maintaining the same rate of underwriting loss while increasing sales will also increase the total loss, but it is not at all rare to see an investor report congratulating management on increased sales in a circumstance where a larger loss was made.
> Dude, your #1-5 just listed reasons why the core insurance operations have to be profitable, or they cease operations. That's making my point. You made no reference to their investing activities overcoming losses as you implied. If they can't price risk effectively in their core business "under normal conditions," then they will get competed out of the market.
You asked me to address those specific circumstances, which I noted are largely separated from the aggregate of all circumstances and markets that drive the insurance industry as a whole. You are missing my big point; the insurance industry do not get rich by charging you premiums higher than your claims. Any profits they make are slim, and normally eaten up by losses in the long term (again, see your own source). The insurance operations don't have to be profitable, and they aren't according to both your source and me.
They have to be predictable so that you can price your premiums in a way that the underwriting losses aren't greater than your investment income. Those reasons I listed are what make those policies unpredictable, un-priceable effectively, and therefore not an acceptable way to lose money.
I didn't address the fact that they make their losses back in investments because it was the whole point of my original post, and all of the sourcing that I have done; it is broadly made in the quarterly reports I linked to, as well as the letters to investors from Warren Buffet.
Per your own source and decades of investor documents, the industry posts underwriting losses constantly, and makes their profits by investing the float. It isn't a big secret.
I pay $100, they pay out $90 on my behalf in that time period, total cost to them is $110 because overhead. That it cost them $110 and I only paid $100 doesn't mean I'm not losing $10.
Of course they actually make $111 because they invested my money but that's beside the point.