A sensible insurance reform?

[Cryptoderk]

I see this as analgous to derivatives.

Basically, a free market for insurance (like Zopa is for personal loans). People describe their driving history*, and then (other) people agree to pay if the worst should happen (perhaps re-insuring for losses greater than fifty grand, or whatever).

Obviously one would have to be pretty wealthy to get involved. But I see it as an exciting idea, particularly for speculators.

*Or whatever, could have much more exotic types of insurance.

[Rick]

They already have such a system, it is called an insurance company.
In fact if you go back and read about the history of Lloyds of London this is exactly how it worked.

In the days of sail and rudimentary navigation, the news was often bad: ships were wrecked and merchants ruined. Although ship and cargo insurance can be traced back to the Phoenicians, it was at Lloyd’s coffeehouse that modern marine insurance was born. A shipowner would write on a slip of paper the particulars of a proposed voyage–the name, route and ports of call of a vessel, the value of its hull and cargo, and the amount he was willing to pay for “insurance.” Other coffee drinkers arrayed in booths and benches around the room, many of them shipowners themselves, would then decide how much, if any, of the risk they were willing to accept in exchange for the premium. An “insurer” would write his name on the shipowners’ slip under the shipping information (hence the term underwriter).

[friedo]

@Rick

In fact if you go back and read about the history of Lloyds of London this is exactly how it worked.

That’s pretty much how Lloyd’s still works, although nowadays they use fancy computers and stuff instead of coffee house napkins.

Peer-to-peer lending sites like Zopa and Prosper.com are quite an interesting experiment (I dedicate about 5% of my investment portfolio to “completely insane” ideas and right now some of that is in Prosper loans.)

But insurance is a lot more complicated than unsecured cash loans, and might require significantly more overhead for the policy writer. For example, Prosper doesn’t offer secured loans yet because they simply don’t have the resources to deal with title searches and liens. So if you started a Peer-to-peer insurance website, you’d have to cover the significant overhead somehow. (e.g., with a lot of initial startup capital.)

[ultrafilter]

Anyone can post that they have a clean driving record. How do you verify that they’re telling the truth?

[A.R.Cane]

I think the best idea to come along lately is having basic liability tied to fuel purchases, for domestic personal vehicles. If you drive more you pay more, drive less pay less. It was proposed in several states, but the insurance companies lobbied it to defeat. It would level the playing field and encourage people to drive less, buy more efficient vehicles or take public transit. Inurance companies would soon adapt and it would have little effect on thir profits.

[rbroome]

@A.R. Cane

I think the best idea to come along lately is having basic liability tied to fuel purchases, for domestic personal vehicles. If you drive more you pay more, drive less pay less. It was proposed in several states, but the insurance companies lobbied it to defeat. It would level the playing field and encourage people to drive less, buy more efficient vehicles or take public transit. Inurance companies would soon adapt and it would have little effect on thir profits.

Uh, I can’t imagine how this would work. I actually prefer to pay cash for gasoline, helps me control my spending, but if there is a strong economic incentive to pay cash, I predict the number of miles driven/year will plummet any place this is tried. Must be something I am missing.