Insurers make the world riskier?
I’m not going to read it, but it’s friday so someone else might be inclined to do so and then report back.
I’m guessing clickbait.

I didn’t read it either, but insurance allows us to take on risks that we couldn’t afford to otherwise. That’s a big reason it was started in the first place.


the risks are already there. so it can’t be riskier.

For example, if insurance didn’t exist, if you hit someone with your car and kill them, your life is pretty much ruined. Nothing can stop you from having that risk (unless you stop driving), because accidents do happen.

Insurance prevents your life from being ruined, but it doesn’t increase or decrease the risk.

Unless we’re talking about moral hazard where having insurance make you a more reckless driver, which is possible I guess.

I’d bet the spin is insurance allows you to take on more exposure than you could otherwise which feedback loops into the economy having more exposure than it would have otherwise had which seems rather silly

Exactly. Without insurance, some people would avoid that risky behavior.

In a similar vein, without insurance, we would have far fewer satellites in space because not every company would be willing to gamble that their $500M satellite won’t blow up on launch.

I’m sure that’s true of some risks. But probably not driving. People drive without insurance all the time.

And there are certain risks that really can’t be avoided, like accidental death

So we’re going to discuss what the paper says wihtout anybody reading it, huh? I’m down.
I suspect that they’re arguing that given insurance that therefore people are more likely to take risks. i.e. more kidnappings because people have insurance and are more likely to pay.
But, didn’t read the paper or anything.

People might not be willing to park their cars on the street overnight if they weren’t insured against theft, though. So there is definitely additional risk being assumed by not parking in the most secure location possible.

Well, if we are going to read the paper, they are pointing out that insurance mostly just shifts the losses from one place to another, rather than actually working to reduce risks. Which is partly, “Well, duh”, and partly, yes we do do loss mitigation and reduction.


Also, flood insurance :rage:
Make all coasts unbuildable zones.

What do you have against cliffs!?

If I’m not mistaken, a lot of what we do may not reduce expected value, but it does reduce volatility - which is as fine a definition of risk as any.
I think we’re all pretty much agreed the article is likely nonsense. It’s why I couldn’t be bothered to read it.

I’m through the introduction, and it already makes some absurd arguments. A whole tangent on how insurers like dash-cams to skirt liability and references a article of all things. Then this gem about the NAIC:

More generally, insurers have significant influence over directing laws and regulations that affect the industry, allowing their risk-leaning attitude to have broader impact. Thus, insurers can collaborate through the National Association of Insurance Commissioners (NAIC),5advocating for the adoption of laws and regulations drafted by its subcommittees as proposals to legislators.6 This raises concerns that insurers, through NAIC, would increase statewide risk if it serves their long term interest. In other words, they might have access to the knobthat affects the level of long -term risks in society and set it above the optimal point.

Haven’t gotten to the details, but they specifically point to kidnapping, cyber and health insurance as ones that give rise to third-party moral hazard, which I guess I can understand that being insured for the risk gives incentives to the bad actors. It also potentially saves lives in all three instances including cyber where the thieves just want the ransom and are less attracted to identity theft aspects of the crime.

I hope they eventually realize the true masterminds of all the evildoing, the actuaries!

Is anyone else attending the naic collaboration convention this year? :rofl:


Didn’t read all of it given that it was Friday night, but the first bit seemed to be about the incentive for insurers to ensure that a certain risk continues to exist. If a certain risk was no longer possible, then there would be no need to insure against it, just as there would be no need for a fire department if fires were no longer possible, or if there was no crime there would be need for police.

However, many risks are unlikely to be eradicated in the near future, so in the meantime we need professionals to help us through them. Insurers will do their best to prevent and mitigate the loss as they are incentivized to have less losses than their competitor. If a certain risk can be completely eradicated an insurance company understandably is unlikely to be first to announce it but I don’t think it’s their role to do that - it’s more likely to come from a lawmaker or a change in technology.

A hypothetical (never happened, I know), say if there had been sleep-in insurance. If an insured sleeps in and misses an important appointment, they can claim sleep-in insurance. The insurance company can come up with all sorts of prevention and mitigation - decaffeinated coffee the night before, earplugs for sleeping, quick taxis in the morning to get you to the appointment - but then someone invents the alarm clock and it’s no longer a risk (well, for most) and the insurance product ceases to exist.

the risk of falling is greater the closer u are to the edge. so risk is different in different situations. if anything, insurance makes the world less risky, because less accidents mean more profits (think about discounts for smoke alarms)

Accidental death isn’t, by a textbook definition, an insurable risk. In that there is no financial loss incurred due to the nature of the death being accidental.

Your financial need if your spouse or parent dies in an accident is identically equal to your financial need if they die from any other cause.

The classic example is when someone has a heart attack while they’re driving their car. They crash the car and they die. Does that trigger an accidental death payout?

Well it depends on what the autopsy says. If the autopsy says they were dead from the heart attack before the car crashed, then no. If the autopsy says the crash killed them seconds before the heart attack would have, then yes.

Does that person’s family’s financial need vary based on what’s written on the autopsy? Of course not!

Get car insurance to cover the costs associated with a car accident and life insurance if you have loved ones who are dependent on your income.

Take whatever accidental death coverage your employer provides and don’t spend a penny of your own money on it. And if your employer does offer accidental death insurance, try to get on the employee benefits panel if such a thing exists and talk them out of offering such a dumb benefit and take that money and lower your medical premiums or use it on something else worthwhile.

Paper is 36 pages, which is more than I’m willing to commit to.

The table of contents, for those too lazy to click:

A. Passive Loss Shifting … 91. Failure to Engage in Direct Regulation … 9 2. Self-Interested Interpretation of Existing Legislation … 10 3. Other Motives to (Inadequately) Regulate … 12 B. Active Loss Shifting … 151. Contractual Manipulations … 15 2. Apology Law and The Sorry Works! Coalition … 15 3. Police Violence … 17
A. Third-Party Moral Hazard … 19


  1. Kidnapping & Ransom Insurance … 20 2. Cyber Insurance … 22 3. Health Insurance … 23 B. Objecting to Risk-Reducing Technological Progress … 251. Autonomous Vehicles … 25 2. Passive-Restraint Battle … 27 3. Genetic Tasting … 29 C.Possible Motivation in Investing in Risky Industries … 30