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Comment by a4isms | Hacker News Reader

I used to have a reinsurance company as a client. For those unfamiliar, that’s an insurance company that sells insurance to insurance companies. Example: You buy a $1,000,000 automobile liability insurance policy with a $1,000 deductible.

If the insurance company doesn’t sell enough of these kinds of policies to reliably offset payouts with premiums, they might turn around and buy a policy from a reinsurance company with a $10,000,000 limit and a $100,000 deductible against their entire portfolio.

Thus, reinsurance companies spend a lot of time thinking about things that don’t happen very often but can be very expensive when they happen.

And yes, they had a division that did propositions like hole-in-ones, and also they insured legal betting companies against wild trifectas and that sort of thing.

I have a small trove of stories they told me about bizarre accidents that wound up costing enormous amounts of money.

View on HN

I threw up in a sink at 1am (drunk) and left the water running full-stop, then went to sleep. It flooded the room, then went down the walls to the floor below, and cascaded like a Champaign Waterfall until it reached the offices in the basement where it destroyed servers and computers.

That was the single time in my life I’ve ever, ever been so glad for liability insurance in my life. They covered everything. The hotel had to repaint and replace walls, servers, furniture, carpet, paintings, etc.

Always get liability insurance riders on your home/rental insurance. It’s usually only a few extra bucks a month. Totally worth it in the event something like a sink overflow fails to stop a sink from overflowing while you are asleep.

Anyway, I learned later that my little catastrophe coincided with a number of other little catastrophes which caused them to need to make a claim on their reinsurance company.

Rock stars throwing TVs out of windows? Psssh. It's not a _real_ party unless you trash the whole server room!

bikers don't get invited back, however

Interesting that your liability insurance covered everything without question since there are a few obvious points of fault/negligence with the hotel (if a stray drunk patron can destroy their IT equipment, somebody fucked up, not to mention how a sink should generally not overflow from just being left on.

Perhaps it was reduced by a percentage for contributory negligence I’m not sure OP would know all the facts (he just knows he dosent have to pay)

I think the term you mean is comparative negligence.

Contributory negligence would decline all coverage if the insured in any way contributed to the event.

I'm guessing the hotel filed a property damage claim with their insurance, who then sued the commenter, whose liability insurance worked things out with the hotel's insurance company.

You're right, the commenter would be covered 100%, but their insurance might have only paid out a fraction.

Ah, I’m an Australian lawyer and used a term of art which you might not in the states.

https://en.m.wikipedia.org/wiki/Contributory_negligence (apparently it’s a similar concept you have in comparative negligence)

When people say their "liability insurance covered" something it probably means the insurance also fought whoever they could so that they had to pay as little as possible. In this case, it's possible they went after the hotel for negligence as well.

I feel like that is one of the overlooked values you have in having insurance coverage. You can resolve the issue with your provider and let them go to bat downstream, claw back anything they need to, without destroying your own life.

I had an overfilled tub that resulted in a similiar result however much smaller (~8k in damage). I talked to the people who fixed it and they had an extremely set process to document everything and satisfy the insurance company. I suspect its less that they fight but more that they set the market price for repairs. Multiple worksheets from various insurance groups to document the moisture content, square footage affected, pictures, etc.

Totally agree. There's the obvious part of insurance: If there's a 1% chance of something bad costing you $1000, you can buy insurance for $12. Then there's the less obvious part, which is that the insurance company might only have to pay $900 for the same risk that would cost you $1000.

You missed the part where they barfed in it.

there is an overflow drain hole it case the main one gets plugged

if you look how that works it usually rejoins the main drain above the trap. so if the clog was lower than that it wouldn't help. a well-designed hotel bathroom should have a separate floor drain though.

In my experience, those can't drain as fast as a tap can output water. They are pretty noisy when water does reach it though.

>a sink should generally not overflow from just being left on

I once thought all bathroom sinks had a little drain hole in the side to prevent overflows. But not all do. (in places I've lived in my area of the US)

Depending on how clogged the drain is, ive seen those be useless before. The general case for those to be useful is that main drain is only blocked because the user closed it purposely. If the drain is clogged it becomes pointless-ish

this also assumes the tub doesn't put out water faster than the drain can handle (from experience..)

Yea my bathtub has one of these that helpfully increases the window between “the right level” and “overflow eminent” by about 4x the fill rate without the overflow drain, but certainly can’t handle the extra water indefinitely. I became fascinated by this metric/window when I almost overflowed the tub when I missed a timer.

Y’all know that post about the importance of walking and getting off your phone? I’m your altogether-normal, socialized coworker that’s in the bathtub 2:30-3:00PM doing pretty much the same thing being described there. What a place to be and think!

Sorry I can’t respond to your IM right this second, I’m thinking about the fill rate of my glorious tub, it’s failsafe features, the pothos over my head, the spider friend in the corner, and - before you get too concerned - whether these new bugs warrant further review of network architecture we’re building out.

I love the tub, and I make no apologies for it. Good morning HN, thanks for reading.

there's usually another drain in the bathroom floor, at least where I'm from

Same. Every bathroom in my house has that. Though the kitchen sink does not, now that I think about it (I'm in Australia).

That’s very common in Asia where any rooms with a water source (kitchen, bathroom) also has a floor drain. Even balconies often do.

Not common at all in the US though new construction may include them in laundry rooms.

They’re actually a really smart idea and pretty much eliminates the risk of a water source leaking.

Not here in the US. It is really kind of stupid.

I think it makes sense to have those in a hotel room, it'll help with more serious cleaning as well if needed. And it is needed. I've heard Stories.

That little drain feeds into the same pipe and trap. If the pipe is clogged, that little drain hole is useless. The purpose of the drain hole is saving your bacon when you intentionally plug the sink drain to collect some water and then forget to turn it off.

The hotel could likely point to legally binding terms that the occupant is responsible for all damages. Insurance companies are used to dealing with "odd" events where many things have to go wrong.

Not sure how legally binding those terms are?

There's a lot of terms that you can physically write into a contract, but that courts won't enforce against retail customers.

I have an extra rider on my policy that waives negligence, maybe parent did too?

Whoa whoa hang on ... I've never even heard of liability insurance when renting a hotel room. Is this standard in the US? Do other countries have it?

This is something covered by the personal liability portion of either homeowners insurance or renters insurance you've already purchased for your own residence.

Protip - renters insurance is a great deal, it's dirt cheap, only a few bucks a month.

There is one small caveat which I think is far outweighed by the benefits - I had my car broken into at a restaurant where my Surface 4, a macbook and my notebook (the most valuable thing!) was stolen. Renters insurance fully covered it. but three years later in another state, one insurance company refused to offer me renter's insurance because of this incident ( per the agent). I had to go to a different company.

Great advice. And read every word of the policy. I was surprised by some of what's covered, like spoiled food from a power outage.

> I threw up in a sink at 1am (drunk) and left the water running full-stop, then went to sleep

One of my acquaintances at Uni did the same during our freshers week, no issues with IT infrastructure, but he did manage to comprehensively flood a conference room which was located below his room in the same building. They were carrying the soft furnishings out for most of the following day after the flood was discovered.

He set a new record in being summoned to the authorities for a serious dressing down before term had even properly started. Also earned himself a nickname he never escaped.

When the Japan Olympics were cancelled in 2020 I read that there was actually some kind of "Olympics cancellation insurace" policy that paid out over it, potentially hundreds of millions. I'll see if I can find it

See here: https://www.reuters.com/article/us-olympics-insurance/insure...

The IOC had 800 Million insurance and overall was 2-3 Billion. It would be really interesting to understand how to price an 800 Million Olymoic insurace policy

in Germany there were quite some lefal battles around cancslling of Oktoberfest. If I didn't miss an uodate on that itnwas concluded that the 2020 Oktoberfest wasn't "cancelled" but it wasn't announced innthebfirst place, as usually the city councils votes for helding an Oktoberfest in spring while there isn't a permanent rule or similar about it. Thus insurances covering "cancelling" didn't have to pay.

Excuse me sir, but have you been drinking?

Heh, that reminds me:

Officer: Sir, how high are you?

Dude: No officer, it’s high how are you

lefal is a perfectly cromulent word and nothing to do with f and g being quite close on a keyboard.

I am personally, barely, three sheets to the wind - I've only guzzled two bottles of red!

maybe but I regularly do that x<space>y oh no I hit xny and the auto-corrector will not split wordx and wordy. And I am pretty sure I have managed to add andnthen to my auto-correct dictionary.

He's been to Oktoberfest, obviously

I personally thought it was the contagion of the two typos in the end of the parent comment

Reminds me of a time that me and a co-worker stayed in late on a Friday night figuring out how to make our email alerts seem convincingly human through “random” typos in alert messages by performing human like keyboard adjacent miss-presses, extra key presses (either duplicate or keyboard adjacent), and occasional whole word omissions for things like “the” or “and”- but only for alerts sent between midnight and 2am on weekends. This of course, only after dissecting and trying to characterize what kind of typos we thought were common by drunk people using QWERTY keyboards.

It was a simpler time, before autocorrect errors dominated, and it was also a fun Friday night. The somewhat regular “Adam bot” in “party mode alerts were just little bit more amusing to be woken up by late at night when things were broken.

One thing that I had to learn the hard way after switching to full-time remote is to never open slack or anything work-related while drunk or under the influence of other substances.

Especially if use the same messenger app both for work and for personal use. And by "personal use" I mean sharing porn with your significant other.

"Force majeure" became one of those semi-obscure legal concepts that took front & center during the onset of the pandemic...

I’m surprised Force Majeure didn’t provide a way for the insurance company to not have to pay this out.

Wimbledon took out insurance against a pandemic after the SARS outbreak in 2002, so maybe the Olympics also paid to insure against pandemics specifically.

https://www.sbnation.com/tennis/2020/4/8/21214031/wimbledon-...

If you are insuring against the Olympics being covered you are insuring against a lot of things that are normally covered by Force Majeure (wars, revolutions, pandemics, terrorism etc).

Wimbledon too.

https://www.sbnation.com/tennis/2020/4/8/21214031/wimbledon-...

> The All England Club reportedly updated its Wimbledon insurance policy years ago to include the infectious disease clause following the worldwide SARS outbreak in 2002.

In this vein, one of my favorite financial vehicles is a catastrophe bond[0]. They are essentially short term debt instruments that pay a coupon normally, but in the event of a specified disaster, forgive the principal (thus removing the liability from the bond issuer's balance sheet).

[0]: https://en.wikipedia.org/wiki/Catastrophe_bond

> in the event of a specified disaster, forgive the principal

Cat bonds are fascinating. What you describe is one of many structures. In essence, bank loans are to bond markets as reinsurers are to cat bonds.

"In essence, bank loans are to bond markets as reinsurers are to cat bonds."

I'd love to hear someone elaborate on this, as I don't understand.

Economically speaking, (bank) loans and bonds are almost the same thing.

There's a bit of a legal difference. And bonds are expected to be traded relatively easily, but your creditor selling your loan to someone else is not quite as common.

A re-insurer is someone who insures insurance companies. Many insurance contracts for you as an individual have you pay for the first few (thousand..) dollars of damage, and the insurance companies covers everything afterwards.

Of that liability, insurance companies cover the first few (million) dollars of damage, and often pass on the excess liability afterwards to yet another specialised company. The re-insurer.

Catastrophe bonds are a way for bond investors to take the liability that would normally go to re-insurers. Of course, in return for taking on some liability, they get paid. Just like you pay your insurance company a premium.

The typical point of a hurricane bond is that it tends not to correlate with other investments so much. A reinsurer is going to need a lot of cash if a hurricane hits but the rest of the stock market likely won’t be very effected. If you’re a pension fund it reduces risk because the stock market going down is unlikely to affect your hurricane bonds and a hurricane is unlikely to affect your regular bonds/equities. However sometimes they are correlated. If you’re the WHO you might issue cat bonds that don’t pay out the principal if there’s a pandemic, and then you can use these to help surprise the next Ebola outbreak that affects some poor countries a lot but global markets little. But then if you have a global pandemic and everything is shut down, the pandemic bonds still keep the principal but the equity markets also go down a lot, which is not what the typical investor in those bonds would prefer.

On Mythbusters, every now and then they would say something like "We would like to do X [e.g. something crazy like jump out of a plane with a duct tape parachute], but our insurance company wouldn't let us."

I've always how that worked. Like, who is the employee at the insurance company who takes that call, and how do they decide what's just too risky, when there can't be much historical data on risk?

An insurance company will always say yes (if you can find that company) it was probably just outside of the show’s budget to pay the premium.

Most likely the management would prefer the hosts didn't hurt themselves, so took the hint from the insurance company when a show plan got too dangerous.

> how do they decide what's just too risky

The question that's asked is "would XYZ claim be covered under the terms of our current policy". Usually the best answer I've been able to get is "probably so". The unique challenge in the case of an intentionally planned dangerous stunt is that most such policies are intended to cover "claims of negligence related accidental liability."

If you planned to do something you knew had a high likelihood of being dangerous, that's not an "accident." Many such policies have specific limitations, stipulations and requirements to remain in force. For example, purchasing a liability insurance rider to cover a large corporate party may have limitations like limiting the number of people, stipulations like all the bartenders must have training on not serving inebriated guests and requirements such as having hired paramedics present.

When you file a large claim on such an insurance policy, they will check that you were in full compliance with all the policy requirements before paying out. Source: I know an attorney who works in a law firm specializing in policy holders suing their own insurance company when they refuse a claim. I'm sure there are good insurance companies and bad but based on the stories I've heard you definitely want to make sure you're in compliance under any policy you're substantially relying on.

And obviously, Mythbusters would have a special relationship with their insurance people.

I can imagine their insurer and production crew to have had a very intimate relationship.

Ring Insurance company rep sees caller ID: "Oh no. What have they thought up THIS time?"

> Like, who is the employee at the insurance company who takes that call, and how do they decide what's just too risky, when there can't be much historical data on risk?

I suspect that it is the underwriters, who are responsible for assessing risks and determining what constraints and requirements must be met to claim insurance. Their work can be highly mathematical and, other times, they will just look at the underwriting guidelines and say "No, we won't let you test a homemade parachute on a living human because your team are not professional parachute manufacturers with valid indemnity insurance we can mitigate our risk against."

Showbiz is a bit different

Production companies and financiers won’t show up if the insurance company won’t

Also there is the ease of having video evidence and so many witnesses that have different goals

It's not an employee deciding it's written into the policy

It's a clause that specifically excludes certain specific actions from coverage.

I'd encourage you to read your own insurance policies, they are fairly easy to understand..

Adam Savage does weekly-ish AMAs on his YouTube channel[1]; he’d probably be happy to answer this question if you sent it in.

1. https://www.youtube.com/playlist?list=PLJtitKU0CAeg88RBY08TZ...

Reminds me of the movie "The Big Short", specifically the "Brownfield Capital" subplot.

I'd love to hear some of these stories. I've never had any visibility into the world of insurance, but it's always kinda fascinated me.

Story #1:

Young man riding a motorcycle, accident, suffers catastrophic but non-fatal head trauma. Problem 1, part I: Requires assisted living for the rest of his life. Problem 2: He has the hormones of a young man, the muscles of a young man, but the intellectual capacity and emotional regulation of a baby. Requires a very specific type of assisted living care that can handle violent behaviour and possible sexual assault. Problem 1, part II: His lifespan is estimated to be longer than usual, because he can no longer do things like ride motorcycles, smoke cigarettes, or have a stressful job.

Put those things together, and the estimated total payout was well into eight figures. The motorcycle insurance company was on the hook for his care, and they had insured their portfolio, so everything over their $1,000,000 deductible (or whatever it was) fell on the reinsurance company.

Story #2 (also, 3, 4, 5, and so on, it’s a common thing for reinsurance companies):

Flood happens in a place where floods are uncommon, e.g. Tornado hitting Barrie, Ontario. Home insurance companies are hit with hundreds, even thousands of claims. Most are not in the eight figures, but insurance companies don’t just buy insurance against exceptional claims, they also buy insurance against single events like floods triggering unusually large numbers of claims that would otherwise fall below the deductible.

This is what reinsurance is for, so the interesting bit to me is what my client related: It seems that a statistically improbable number of people just happened to have all their furniture in the basement while they were painting their house or some such, and it all got ruined, so the insurer is on the hook for replacing furniture that wouldn’t normally be in the basement (we are not talking about people with furniture in finished basements, we are talking about people claiming they were storing furniture in their basements).

Normally they have the bandwidth to investigate such wild claims and reject most of them, but when they all come at once, the insurance company looks very bad if they tell everyone to wait a month or three while they work through a backlog of investigations. So they lay off their losses on the reinsurance ompany.

Story #3:

After regaling me with stories about improbable events and how much the reinsurance company had to pay, the GM of the office I dealt with told me that he owned two cottages:

One “entertaining” million-dollar cottage on a lake in Muskoka, Ontario, where one could jet-ski and power-boat.

And one “get away from it all” cottage on a different lake that had a 5km/hr speed limit, effectively barring motorized sports.

From this I deduced that for all their wild payouts, they were running a good business that could afford to pay its management quite handsomely.

To be clear: Floods, wild fires, and earthquakes are special, as they tend to impact a large area, instead of a single property. In many places, the gov't acts as the final re-insurance because no re/insurance company can possibly cover all possible damage without risking bankruptcy.

That reminds me of my parents putting my recently-died laptop in a particular place in my bedroom and pouring some water on it, after our hot water cylinder broke and leaked its contents above my bedroom destroying the roof (when I was a young teen).

I had a friend who dabbled in rare collectables and he told me you can almost always find a broker willing to insure, quite literally, anything.

Lloyds of London are quite open and proud of being willing to insure anything - they've insured singer's voices, model's legs, all manner of things.

Are they insuring densely populated countries against the consequences of disastrous nuclear reactor accidents?

I suspect even a company that claims to 'insure anything' would balk at things needing a $200 billion payout.

Well, there's always the strategy of 'take the payouts, go insolvent in case the event really happens'. But, on the other hand, such a high possible payout would probably come with insane premiums that might make it viable (for the insurance, not the country).

Depends on the premium they would charge.

Are you thinking of Belgium, Korea, Taiwan, or Japan?

For nuclear reactor incidents there are reinsurance pools. A collective of insurance companies. For example the nuclear reactor in Borssele, The Netherlands, is insured backed by 26 of such collectives (one national, and 25 foreign collectives) together they consist of over 300 individual insurance companies.

This particular (small) reactor is insured for liability up to 1.2 billion euro.

The problem is, the followup costs for a nuclear reactor disaster can easily reach multiple trillions of euros - and no plant is adequately insured. In Germany, they did the maths [1] in the wake of the 2011 Fukushima disaster and found out that decent insurance would cost 72 billion euros a year in premiums - a move that would raise electricity prices from 20 ct/kWh to 4 euros/kWh.

We have been ignoring that massive risk in favor of "cheap" electricity for decades, and every time something happened, in the end the taxpayers had to cover the bill.

Nuclear simply is financially unviable once externalities are properly accounted for. Add to that cost and time overruns in projects, the still unsolved questions of where to dump the waste, of nuclear weapon fuel proliferation... and just forget about fission-based nuclear projects, please.

[1] https://www.manager-magazin.de/finanzen/versicherungen/a-761...

Yes, but, you could also say the same of fossil fuel power plants as well. The world has been getting "cheap" electricity from fossil fuels for many decades now while ignoring the environmental (and other, like nuclear waste problems from Coal) externalities that taxpayers ultimately have to face one way or another as well. You'd need a comparative analysis of the externalities of both to make sense of the trade-offs and pick one that's "better".

Renewables like solar and wind are great of course, but they're intermittent and cause weird issues like the Duck Curve. You still need base load from either nuclear or fossil fuels for a stable, reliable grid.

Given Chernobyl cost about around 235 billion USD to cleanup - What constitutes "decent insurance"? How much are they expecting to pay out?

It's not just the direct cleanup costs - the number goes up extremely hard if you also attempt to account for externalized costs that are rarely grouped together:

- loss of life and the economic productivity of people who died early (not just the liquidators, but also everyone who got radiation damage!)

- loss of sellability of goods - to this day, Bavarian shroom collectors and hunters have to check fungi or wild animals for radiation, and in particularly bad years up to 70% of wild pigs have to be discarded due to irradiation [1]. That's an economic loss for the hunters and for all subsequent economic activities (butchers, restaurants).

- healthcare cost associated with dealing with the fallout - cancers are the most expensive illnesses known to mankind

- loss of quality of life in those who were displaced by the Chernobyl and Fukushima disasters, additionally also the cost of relocating and the loss of opportunities, social networks etc. caused by the relocating

- loss of economic potential that could have been realized in the area around Chernobyl, had it not been contaminated

[1] https://www.welt.de/wissenschaft/article230648425/35-Jahre-n...

But are these the kinds of costs that are accounted for by an insurer? Have local hunters/butchers/restaurants managed to get compensation for loss of revenue?

Also, these costs seem specific to a melt-down. Fukushima wasn't just poorly insured, it failed to heed studies warning about its location.

> the still unsolved questions of where to dump the waste

This isn't an unsolved problem, just an uneconomical one - there isn't enough waste for any of the possible solutions to be economical. The solution to getting rid of nuclear waste, is to produce enough of it to make R&D worthwhile.

> of nuclear weapon fuel proliferation

But how does this relate to power plants? The military will get its nukes, whether or not the plants are built.

> But how does this relate to power plants? The military will get its nukes, whether or not the plants are built.

The problem is that the plutonium will be created in the first place and needs to be taken extra care of to make sure the stuff doesn't get stolen or "misplaced" and then diverted off to terrorists.

They were known in the 90's for insuring pro wrestlers bodies if they were injured to the point that they could no longer perform. It was pretty common to hear about a wrestler retiring with a "Lloyds settlement".

Yes you can.

And I it's great for the wealthy.

Forcing insurance on poor people is not right.

The poor have a tough enough time just keeping their head above homelessness.

I have been required to pay for automotive insurance in California for approximately 20 years. (In CA mandatory insurance was required, but not mandatory forever. There is a weird legal difference. I white knuckled my college years while driving. I got lucky except onetime. A wealthy women slammed into me, and the minute she, or actually her lawyer husband, found out I didn't have insurance, I was putty in their hands. I paid $1000 for an 1982 Volvo bumper. It was the last of my student loan, but they had me. A call to DMV and I wouldn't be able to commute to my school.)

Every year if I want to drive my old truck I needed to come up with $600.00 plus. Even with a perfect record since 15.5 years of age.

I only can afford the minimum. I never made much money even as college graduate. I believe it's 15-30-5. (this means if slam into you and you are a vegetable; you will get $15,000 for injuries, and $5,000 for your Tesla. Great payday? If you have money you can go after my assets.).

My point is it's not enough if we are being honest.

The insurance industry loves these minimum mandates because they make billions off the poor, and middleclass.

It's no wonder the insurance industry is always the number #1 Lobby group on every political fund.

It's a racket, and I believe the bigger boys are colluding on rates, but can't prove it.

"Buy the per mile insurance dude--you low income loser!"

(1. Work out the low income insurance on a yearly basis, and it's not copasetic. Plus my old Toyota does not have a computer other than a rudimentary computer that was suspose to control the main plunger in the naturally aspirated carb that never really worked. Meaning there's no computer to plug a mileage indication in. So there's no per mile insurance I can get.)

My point is mandated insurance is kind of a racket like this two year mandated Smog check, especially on vechicles that that we only use a few times per year, or under 1000 miles/per year.

Rant Over.

Car insurance seems like a good thing, I wonder why it's not subsidized for the very poor.

In California, at least, this exists: https://www.mylowcostauto.com/

You wrote: <<Car insurance seems like a good thing>>

In /some/ places, car insurance is required by law. How does it work in places where it is not required by law? At first thought, it appears more financially risky to drive! I guess that insurance would be even more expensive because it is more likely that the other side is insured.

>> In /some/ places, car insurance is required by law.

Looking this up for the US (the country where I live), it seems that only NH doesn't require car insurance (ninja edit: Virginia as well). So for me, this is an interesting hypothetical, but not in a way that's a part of my reality as I do not live in either of those two states.

>>At first thought, it appears more financially risky to drive!

As someone who does not own a car, and does not drive (and is poor - very poor in HN standards as well as in the city I live in), I would like drivers that I share the road with to have insurance, rather than drive without insurance. Getting hit by an uninsured driver would be an absolute nightmare that I doubt I could even afford to bring to court.

> Getting hit by an uninsured driver would be an absolute nightmare that I doubt I could even afford to bring to court.

Not sure about the specifics of your car insurance but mine would cover that.

Hopefully you read the part of not owning a car and thus not having car insurance, so my non existent insurance would not.

Texas technically doesn't require auto insurance either, but you need to leave some crazy amount of money in bond with your local sheriff, essentially proving you're rich enough that you can insure yourself.

Seems a bit silly to have specialised subsidies for everything. What's next, subsidies shoes for poor people?

Just give poor people money, instead of a million special programs with extra bureaucracy and red tape.

Root insurance uses your phone to track mileage instead of an OBD 2 dongle. This works for some people.

https://www.joinroot.com/

American insurance is so freaky. In Nova Scotia, everyone has minimum $1 million liability coverage. Everyone also has uninsured driver coverage, to cover them if they're hit by an uninsured driver.

if everyone has $1mm of insurance, why would anyone need uninsured coverage?

Same reason you would need it in California. Some people don't have insurance, against the rules.

Just thinking off the top of my head here, there are more drivers then those registered in Nova Scotia. Not all of them have insurance.

And I know how OP worded their post, but legally in my state you have to have insurance and despite that not every driver actually has insurance. It's not like anyone checks your insurance when you put the keys in the ignition...

The fact that everyone must have insurance does not mean that everyone has it. I mean, someone can cause an accident while not having a drivers license with a vehicle that's not street-legal.

I'm not from Nova Scotia, but we have the same principle of mandatory insurance that has to cover also the accidents caused by people who are violating the requirements, which doesn't add much since the requirements are strictly enforced and violations are not that common, but mitigates those rare cases.

People can drive illegally. Everyone has $1mm of insurance to legally drive.

So if you are poor and hit me in your car and you don’t have insurance, who is going to pay?

If you have uninsured/underinsured coverage (required by most auto loans): your insurance company. if you don't, you pay and/or sue the other driver.

Yes I realize that. But why should my insurance premiums go toward paying for someone else without car insurance?

And what good is it trying to sue a “poor person”?

While I never had to sue anyone, I looked into all of the hoops you have to jump through to collect damages when I was a landlord. It wasn’t worth the time or the effort.

> But why should my insurance premiums go toward paying for someone else without car insurance?

Because that is what uninsured motorist insurance is for? If you buy flood insurance and it floods…

> But why should my insurance premiums go toward paying for someone else without car insurance?

They go to covering your risk of loss from damages causes by an actor from whom funds cannot be recovered.

> And what good is it trying to sue a “poor person”?

None, often, that's a large part of what you are insuring against by having uninsured driver insurance.

And theoretically, how much more would insurance cost if states didn’t enforce every driver have insurance? As soon as you cancel insurance in my state, it gets reported.

same in Louisiana.

And in my original comment i was speaking to the nomenclature of "everyone has $1mm liability insurance" rather than anything else. I hadn't eaten all day and it shows in my comment history full of snark and toeing the line of being a decent person.

An uninsured driver hydroplaned on the freeway and broke off the front passenger side wheel of our 2020 SUV. Our insurance paid out about 20k to fix everything. They waived the deductible on the comprehensive collision coverage. We paid another 1k or so on top of that for a rental car, since it took about 3 months and the rental coverage ran out. Our premium didn't go up since we weren't at fault.

The insurance company was going to look into suing the driver, but it's not like there was even enough money there to pay for the lawyers.

> Even with a perfect record since 15.5 years of age.

Each driving session is statistically independent. The probability of you getting in a vehicle accident resets every time you get behind the wheel. The actual probability in each session varies based on things like your alertness level, vehicle condition, weather conditions, traffic levels, and so on.

Something you can do to reduce your premiums is to shop around every 3-4 years. Most of the big-name insurance companies will start raising your rates around that time-frame because they assume the hassle of changing companies will keep you with them (i.e. human inertia). Another way is to drive "old man" cars. They're usually bigger & heavier, and perform better in accidents than something small & zippy. So they get lower rates because the chance of high medical bills is reduced.

> Each driving session is statistically independent.

What's your evidence for that?

not evidence, just basic statistical reasoning based on a set of necessary assumptions.

I'm going to assume you are a reasonably competent driver. Also, that your driving routine is pretty stable. Now these assumptions may not apply to you, but they do apply in general, which is what you need to set insurance risk.

Traffic density on your Wed commute to work is pretty stable week over week, with approximately the same percentage of over-tired or over-stressed drivers.

Your driving ability has probably not significantly improved over the last 6 months.

Thus, your chance of getting into an accident this morning on the way to work is independent of the chance of you having an accident next Wednesday.

Likewise, your chance of getting into an accident this morning is independent of the chance of your co-worker who lives on the other side of town but has a similar risk profile to you of the commute (same type of roads, same distances).

In general, in aggregate. Y

I'm not sure.

Someone who just had five accidents in the last three weeks might drive differently today, don't you think?

If you are willing to pay my inflated premiums, I am happy to insure anything, too.

It's a bit of a mantra within the insurance industry that there is no bad risk, only a bad price.

A reinsurer would, of course, be crazy not to themselves be insured. So there must be companies that insure reinsurers, and then companies which insure companies which insure reinsurers. How deep does this rabbit hole go?

It can be circular rather than nested. You may reinsure a peer company’s auto policies while they reinsure your home policies.

But that's not really circular, is it?

If they have to pay out on their reinsurance of your home policies the fact that you've reinsured their auto policies does not help them.

Someone has to insure their reinsurance of your home policies, don't they?

You've described part of the 2008 financial crisis.

Pretty much what I was thinking. A number of seemingly uncorrelated risk that, scratching the surface, turn out to be highly correlated.

I assume re-insurers use Lloyd's of London to split/sell very large risks. This is similar to syndicate loans, where a group of banks agree to split a single very large loan for huge construction projects. Although, these days, syndicate loans are much less popular than directly issuing debt via capital markets (if possible).

Usually there are a few deep players Berkshire Hathaway(who happens to own a reinsurance business or two) has about $150 billion in cash just laying around, so they can pretty much insure anything they want and backstop it themselves.

But for those without such a deep bench, they, like other commenters mentioned do a round robin sort of thing.

Though you don't have to have 150 billion USD in cash. You can also have, say, 250 billion USD in the stock market instead.

(I went with a bit more, because stocks are more volatile than cash.)

Insurance coverage is typically limited. So even if you caused a billion dollar in damages, your insurance would only be on the hook for, say, a million dollar.

So there's a limit to how much they need to re-insure.

Someone already said that the rabbit hole ends with eg Berkshire Hathaway. But it also ends with eg (retail) investors who hold catastrophe bonds or shares of insurance companies.

Catastrophe bonds, which impose losses on holders in the event of a catastrophe, are an increasingly popular way to re-insure or re-re-insure. Because they can be widely held and each holder can hold them as part of a diversified portfolio, the risk can be dispersed much more widely.

Back in the 70s one of my mother's friend had his car to fail on a level crossing. A train arrived, crushed the car, the locomotive derailed, fell into the river, destroying the railway bridge over the river, then the following wagons derailed and fell into the river too (fortunately it was a freight train so nobody was killed).

The cost was mind-boggling, millions upon millions. It nearly bankrupt his insurance company.

Why does insurance as a business feel like legalized gambling? “I’ll give you 1000:1 odds that you won’t crash your car” “I think that person will win that bet and I’ll give you 100:1 odds”.

In general insurance is designed to contain or negate your loss, but not to allow you to profit, so in that respect is different to gambling.

Yeah but what about life insurance? It's not the deceased who gets the payout, it's their survivors. It's a real grey area ethically, as you can think of it as the survivors taking a bet on whether a family member will die soon, and profiting off of winning that bet. You could argue that the dead person approved and paid for it, but that's not always clearly the case.

Some whole-life policies carry cash value and are an investment vehicle as well, so you can potentially make money on them surviving as well. This seems ethically-better, but most life insurance is term life that doesn't have this investment upside.

Because economically and mathematically insurance and betting is the same.

It's just that morally we treat insurance differently; and society has developed some moral and ethical rules around this topic. But because the mathematical structures are so similar, you can guess that the moral rules have lots of grey areas.

(Similar for financial derivatives. Eg farmers use wheat futures to lock in the prices for next year's harvest today. Speculators use the same futures to 'gamble' on prices.)

> Why does insurance as a business feel like legalized gambling?

The mathematics are similar from the ensurer/casino side. However:

1. The happiness impact of losing 5x your net worth (house burnt down, eternal debt) is likely much bigger than gaining it.

2. It's harder to repeat sell insurance to someone until they are broke, compared to a slot machine.

Because they are. In fact, there's an entire trifecta.

If you take bets on how companies will do in the future, it's called finance or investment services. If you take bets on human misery, it's called insurance. And if you take bets on sports, it called gambling.

Businesses in all three have, for good reasons, the reputation of being predatory.

I feel like someone deep into reinsurance could probably write a pretty good book or two.

Reinsurance business is a black swan [0] in the negative direction.

[0] https://en.wikipedia.org/wiki/Black_swan_theory

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