Re:Insurance is like gambling, don't overdo it
by perl4ever on Sunday June 20, 2021 @05:54PM
(#27574255)
> that's something actuaries have thought extensively about
But I don't think there is any solution. The further out on the "tail" you go, the more the total risk depends on the accuracy of information and assumptions you have. If there is an extremely large potential loss that is extremely unlikely, then the average becomes unknowable since the probability estimate in particular could be off by orders of magnitude. Nuclear power plants would be sort of the archetype of that, I think.
I mean, I reason like this to justify what I actually observe - that insurance companies don't want to insure things without strict limits. Despite reinsurance existing.
But I don't think there is any solution. The further out on the "tail" you go, the more the total risk depends on the accuracy of information and assumptions you have. If there is an extremely large potential loss that is extremely unlikely, then the average becomes unknowable since the probability estimate in particular could be off by orders of magnitude. Nuclear power plants would be sort of the archetype of that, I think.
I mean, I reason like this to justify what I actually observe - that insurance companies don't want to insure things without strict limits. Despite reinsurance existing.