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Comment by kevindong | Hacker News Reader

How insurers determine your rate is generally available online [0]. That being said, some of the documents are almost unreadable.

I recently tried to figure out how I could optimize the amount of renter's insurance coverage I got from State Farm for the premium paid (I'm currently paying the minimum premium that they'll charge for any renter's insurance policy; $125/year) and their posted document was so dense and filled with jargon that I couldn't do it [1]. The document only contained the changes made since the previous approval. But I couldn't actually find the previous approval. So I was missing quite a few critical pages.

[0]: This is for NY: https://filingaccess.serff.com/sfa/home/NY

[1]: The overall filing package (https://filingaccess.serff.com/sfa/search/filingSummary.xhtm...). The rate document is named "NY HO 2019-05-01 Pages Changed.pdf"

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The complexity seems to be the point.

Many states allow complete opacity, and in those states, the companies operate completely opaquely. In states in which information is required to be made public, it's buried in overwhelming detail and hidden behind "change X from 0.04 to 0.007 from sub-reference 37N" language. That's deliberate.

They're selling a service that people are required to buy. It should be no surprise that the equilibrium reached is "be as consumer hostile as possible without violating the letter of the law enough to get told to stop"

Technically most states allow drivers to post a surety bond as an alternative to purchasing a liability insurance policy. But in practice most people don't have enough cash available.

A bond also loses you the personal/medical liability protection of auto insurance. Very few people who do have enough money would drive with only a bond, as the risks are pretty extreme.

even if you have the cash, it’s very not smart to do so. you need about a million or so in liability (almost all cases settle under $5mm). insurance is far cheaper.

There are lots of things we are 'required to buy' - food, shelter, etc. There is still competition, though, and we don't see price gouging in food, for example, just because people have to buy it.

If insurance is so overpriced, then why don't other companies enter the market?

I don't think insurance companies have crazy profit margins, so I don't think it is really price gouging going on. It might be shady competitive practices, to trick people into not realizing they are paying more, but I don't think it is because people are required to have insurance.

(PDF Warning)

https://www.naic.org/documents/topic_insurance_industry_snap...

The United States' property and casualty industry's total profit margin on the whole was about nine tenths of a percent in 2018, which was a reversal from being net unprofitable in 2017.

There are about 2500 property and casualty insurance companies in the United States. Surely there's overestimation since (I'm guessing) the NAIC will count an insurance company in several states as several companies for the purposes of a count, but even if that's not the case, there are at least a hundred car insurance companies to choose from in any given state.

The purpose of an independent insurance agent (if everything goes right) is to help a customer select the best policy for their risk, and there are a ton of independent insurance agents, so one hopes that severe price gouging doesn't persist. However, not everyone uses an insurance agent - or the agent only writes with one business - so in practice, this kind of overpaying can occur to lots of people.

> There are lots of things we are 'required to buy' - food, shelter, etc. There is still competition, though, and we don't see price gouging in food, for example, just because people have to buy it.

No, but we absolutely see price gouging in shelter.

Well I am new to US, had to buy renter's insurance; Geico and everybody offered for $20+ per month; but Lemonade quoted about $6. Almost similar coverage. Now for Car, Geico was most economical $86; Lemonade does not offer, Dealer said $125, Others were like $100-120.

I think as more startup companies enter insurance, prices are going to be better & more competitive.

> There is still competition, though, and we don't see price gouging in food, for example, just because people have to buy it.

There's not a law that requires me to buy food, nor a law that requires me to buy specific types of food. I can grow my own food, or buy from other people locally if I wanted to.

> If insurance is so overpriced, then why don't other companies enter the market?

It takes extremely deep pockets to be able to sell insurance in the first place, and it's a relatively regulated industry.

Anyone can grow some tomatoes and sell them to me at a farmers market with minimal overhead. Few can sell me comprehensive insurance that will pay out when I need it.

Food and food sale is pretty regulated. There are probably even more regulations around food production than insurance.

I suspect it is a result of internally misaligned incentives resulting in them valuing new customer money more than existing ones. It is one thing to alienate a loyal smaller base to gain a larger one, it sucks to be on the wrong end of but makes sense. In spite of the obvious that they have equal impact. I suspect it is because of who gets bonuses from it vs blame from losses. If sales and retention are separate departments then sales wins politically because they can generate new customers instead of just stemming losses.

Anyway the reason I think those dynamics instead is because I have seen it in cable, garbage collection, ISPs, and banks. They could be attempting old school dark patterns to exploit inertia and cognitive load in customers but that is a pennywise pound foolish move - the new customers have sales overhead expenses in addition to "maintenance" recurring costs.

I used to work in auto insurance pricing. The algorithms are relatively simple, but the filing is made as obfuscated as possible to fool the regulators, competitors, and the general public. There are no black box models or anything, it's usually just multiplicative factors, but good luck finding the factors and definitions.

> I'm currently paying the minimum premium that they'll charge for any renter's insurance policy; $125/year

Unless that number varies by state, someone may not be being honest with you.

I have a renter's policy with them for $115/yr.

I do believe it varies by state. I used to live in Indiana where the minimum premium was also $115/year.

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