> Just get a household appliances insurance policy.

If the goal is convenience, then definitely. Home insurance policies are quite a lot more expensive than actual repair costs are likely to be. Which of course is expected, the product being sold is peace of mind and convenience -- both of which people happily pay a premium for.

> Home insurance policies are quite a lot more expensive than actual repair costs are likely to be.

Hahaha that's a good one... especially as we're talking about Miele here. ;-)

And you're factually wrong anyway.

I didn't say "home insurance", I said "household appliance insurance". Different thing, unless your home insurance happens to cover appliances.

My household appliances insurance is not expensive. It covers 5 appliances, unlimited call-outs, and you don't get screwed at renewal time if you've claimed on the insurance.

As I said, I've had Miele out A LOT over the years and I've never paid them a penny, and trust me on some of my older large appliances they've pretty much replaced 100% of the internal parts.

Insurance companies operate at about 17% over premiums. Which means, for every dollar someone spends on insurance the company pays $0.83 in claims. This happens at a population level. Maybe you individually have a statistically above average amount of claims and collected more money than you spent. In which case congratulations. Maybe you are in a subpopulation (5x Miele owners) that the company is not accurately accounting for in their actuary tables. In which case the more this subpopulation signs up for insurance the higher premiums will increase, and perhaps if large enough the actuaries will catch on and raise your premiums as a subgroup.

Either way, the insurance company will turn a profit from premiums. I'm glad this policy has paid off for you, but "reducing costs" is not a good reason to purchase insurance. Insurance reduces risk and makes expenses more predictable.

The math isn’t as simple as you make it out to be. See insurance companies have volume and can negotiate better rates and policies. For example they can get 30-50%labor rate discounts or negotiate lower costs for recurring visits and discounted parts costs. As such is perfectly possible for insurance to be cheaper than uninsured services.

In which case it is less about being insurance and more about being an appliance servicing company - even if the work is outsourced.

Put the two together - insurance and appliance servicing company = your described scenario.

Exactly a lot of These companies are like hmos of appliances. Health insurance in the us isn’t really insurance either. If it was pure insurance most people would only by catastrophic

In sum, insurance companies are not selling their product at a loss, and if they are operating efficiently, they aren't selling their product to you at a loss either.

As always the adage "if you can afford to self-insure, you should" applies. There are two reasons you should buy insurance: because you are required to by law, or because the cost of covering replacement or repair would be problematic (either financially or logistically).

The other issue with appliance insurance or extended warranty and the like, it dilutes the obligation of companies to honour consumer guarantees. Certainly in Australia companies have been fined and otherwise penalised for promoting paid extended warranties when they should have been instead offering to make sure they meet the "fit for purpose" obligations

There is one additional reason: if your circumstances make it likely that you will claim more than others, due to a cause that is not accounted for in the fee calculation.

The insurance company may have a deal with the repairers, so they're able to get repairs done cheaper than you can. If that's the case, it may be cheaper (on average) to have insurance than not to.

To the extent that they get special pricing, the insurance company will be pocketing the difference as extra profit, not passing it on to you.

In fairness, I wouldn't be surprised if many of the people who have these insurance policies fail to claim on them or decide to replace their item when it breaks regardless of the insurance policy. A bit like the gym membership model, 90% of people don't use it at all.

Also like warranties.

e.g. I have a Samsung 970 EVO Plus SSD drive that has just failed, and lost some of my important data. Its got a 5 year warranty and is only a year old. I doubt I will bother to go through the warranty claims hassle, because the end result is not worth it.

I would have to send it back to Samsung, with my commercially important data on it locked in the chips, and get back another drive which it seems is not particularly trustworthy to rely on again. I've had 2/5 Samsung SSD drives fail and won't be using them for anything important again, I've just ordered a Hynix to replace it.

Another case, I have had a washing machine fail under warranty recently, again about 1 year into a 5 year warranty. It took 7 weeks and many frustrating phone calls before someone came around to actually fix it. Next time I won't bother to get a new washing machine, I will get a second hand one, and when it breaks I will get another second hand one immediately so I don't have the problem of not having a washing machine for sooo long.

If you're at all handy with tools, fixing appliances is normally pretty simple. The parts are readily available and often you don't need more than a few screwdrivers and wrenches to do the job. I've saved thousands of dollars fixing appliances myself vs. discarding them and buying new.

The door hinge on our refrigerator started cracking after about 1.5 years. It was covered by the credit card warranty, so I tried working with a repair company. They charged $150 to show up and say they couldn't do anything, then quoted $900 to replace the whole door. It was a $1200 refrigerator. I spent an hour and fixed it myself with some aluminum extrusion and a few rivets, then got reimbursed $700 by the credit card company.

My sister in law's oven failed with the self cleaning lock activated. It's an in-wall unit so the repair tech could only think to start cutting apart the wall. Instead, I took a hacksaw blade and painstakingly sawed off the lock. Since I was already committed, we then pulled out the unit and bypassed the failed thermal switch long enough to "unlock" the mechanism. That probably saved at least $1200...

Yeah my father is a handyman and I did lots of house and other maintenance for quite a few year, in balance to the very mental aspects of software! However for now I'm focusing my creative energy on higher value economic activities and spending spare time on the beach yoga or music instead. Someone else can fix that stuff for now :)

>Just get a household appliances insurance policy.

Any insurance is a conflict of interest. The entity responsible for paying out is the same entity responsible for if/how much you get paid out. Any for-profit insurance company is incentivized to pay out as little as possible, if any. Any litigation is likely to cost way more than the payout.

> Any insurance is a conflict of interest. *

* Except group catastrophic

Ultimately, it's a math problem that must have a positive answer for the insurance company. If 100% of policyholders make claims, you generally pay that profit yourself.

However, in group catastrophic policy, the numbers add up. Substantially <100% of people file claims, so premiums can be set much lower, effectively giving you protection against an unlikely scenario at reasonable cost.

My grandfather was an actuary, and constantly griped that low-deductible policies shouldn't even be called "insurance."

If you want to create something like a national health benefit, do so. But don't confuse people by mislabeling it.

Group catastrophic, like all other insurance, is negative expected value in first-order effects, but improves predictability.

This is not fundamentally different from low-deductible policies. (Which may do more, proportionately to cost, to improve predictability if most variance is the number of frequency of low-cost events)

For those who use them. I avoid doctors as much as possible, so if I see one it is likely closer to a catastrophic situation than routine. I would much rather have cheap catastrophic insurance than more expensive low-deductible, because I am unlikely to use the latter.

Why not call it a buying club? You basically use volume to force negotiation of lower price

>Ultimately, it's a math problem that must have a positive answer for the insurance company. If 100% of policyholders make claims, you generally pay that profit yourself.

Not necessarily. Simply holding onto large piles of other people's money can he profitable - eg banks.

That's part of the math problem.

> Any insurance is a conflict of interest. The entity responsible for paying out is the same entity responsible for if/how much you get paid out.

What are you on about ?

Let me spell out how my appliances insurance policy works:

      1. I call $insurance_company and say "my appliance is broken"
      2. $insurance_company says "Ok, here's a code, call Miele, give them the code"
      3. Miele sends out engineer with parts who fixes the appliance
      4. I sign engineer's job sheet.
      5. The end.

To reiterate:

     - At no point have I given Miele my credit card. 
     - At no point have I given the Miele engineer my credit card.
     - At no point have I received a bill from Miele.
     - At no point have I paid Miele in any way shape or form
     - $insurance_company has taken care of everything, 100% of everything, every single time.

But how much does the insurance cost? Are you positive this insurance, over the years, is cheaper than what you would have paid Miele directly?

> But how much does the insurance cost?

Mine is about 350 a year, but they work out a rate per-appliance and then give a discount on the total, so you can pay more (or less) depending on how many appliances you cover.

> Are you positive this insurance, over the years, is cheaper than what you would have paid Miele directly?

Absolutely.

A Miele call-out will set you back 150 call-out + 100/hour, plus parts on top.

Or (if Miele agree) you can pay a "fixed-price" 300 which covers parts and labour (but again, this is subject to Miele's agreement and that agreement is given on a per call-out evaluation).

And as I said, one of my Miele appliances is 10+ years old, they've been back a good few times replacing increasingly major parts each time, so now the only thing 10+ years old about it is the external casing !

Even if I bought the "official" Miele parts myself, I value my time at greater than zero ! So its still cheaper than me buying the parts and spending a half a day pulling out appliances and fitting parts.

And given the price of new Miele appliances, its not exactly like after 5 years I could afford to replace everything with brand new appliances, since that would cost A LOT more than 350x5.

And yet, on average, the insurance company must be making a profit on their Miele policies otherwise they would not sell them or would not stay in business.

It sounds like you have a lemon appliance and were fortunate that you had the insurance.

Begs the question of why you keep buying Miele.

I've had exactly one home appliance failure in the last 10 years - an old fridge that finally died.

You must not live in the US. I see it's a German company, they have much stronger laws governing how they operate. In the US, there are laws, but they are scantly enforced. "Buyer beware." Corruption is gonna crash the insurance industry before too long.

It seems to me insurance companies must break into two categories. The first are honest agents operating on a house-always-wins model. Meaning, over a sufficiently large time and sufficiently large customer base they pay out less than they receive, but only a normal cost + profit margin amount less. Pay out more than that and they go out of business.

The second category would be dishonest agents, which try to avoid payout and have windfall profits and basically skirt the line where lawsuits and reputational damage make that kind of profit impossible. Long term operation as such a business is challenging due to word of mouth, so they must often rebrand or change business names, or just make their products too confusing to understand.