Re:Woman makes $420k by buying insurance on flights she pred...
by colechristensen on Monday June 15, 2020 @04:23PM
(#23532521)
You really weaken your argument about insurance not being a financial instrument by comparing them to call and put options in the next paragraph, saying they behave almost identically. On hacker news, no less "not the intended use" isn't a solid argument about what something is or is not.
More importantly, why does what is or is not a financial instrument according to your rather specific definition matter?
If you see humanism in underpriced flight insurance, do you see exploitation in overpriced flight insurance? Someone making that much money on well chosen flights means most likely other flights are very much overpriced for insurance.
One of the most useful things insurance does is expose real values for risk and put financial incentives on reducing risk behavior on both the holder and the owner/maker/operator or the insured asset.
For example, fire sprinklers and renters insurance. The owner of the unit is motivated to have sprkinklers present and in working order to lower the total cost of the apartment (insurance would have higher premiums without), the renter wants to pay lower premiums so they will insist they are installed or look elsewhere, and the insurance company will have a motivation to have a good sprinkler inspection program that finds out if they're really installed, done properly, and maintained in a way that provides actual risk reduction. Everybody wins as long as the insurance price is not just "humanitarian" but actually reflects the real risk.
More importantly, why does what is or is not a financial instrument according to your rather specific definition matter?
If you see humanism in underpriced flight insurance, do you see exploitation in overpriced flight insurance? Someone making that much money on well chosen flights means most likely other flights are very much overpriced for insurance.
One of the most useful things insurance does is expose real values for risk and put financial incentives on reducing risk behavior on both the holder and the owner/maker/operator or the insured asset.
For example, fire sprinklers and renters insurance. The owner of the unit is motivated to have sprkinklers present and in working order to lower the total cost of the apartment (insurance would have higher premiums without), the renter wants to pay lower premiums so they will insist they are installed or look elsewhere, and the insurance company will have a motivation to have a good sprinkler inspection program that finds out if they're really installed, done properly, and maintained in a way that provides actual risk reduction. Everybody wins as long as the insurance price is not just "humanitarian" but actually reflects the real risk.