The Science Thread

SirRumpole · 28 August 2017

Value Collector said:
Why does that matter? all sorts of things outside of your control determine aspects of insurance.

If taking a genetic test enables earlier diagnosis , prevention , a longer life and more premiums paid, then it's in the insurance companies interest that they be done. Turning people off taking genetic tests by threatening higher premiums is a lose/lose situation for everyone.

People should not be required to tell companies the results of their tests, it's between them and their doctor.

As it is, insurance companies make $billions, so if they lose a few here and there they win a lot more and they can suck it up as far as I'm concerned.

Value Collector · 28 August 2017

SirRumpole said:
As it is, insurance companies make $billions, so if they lose a few here and there they win a lot more and they can suck it up as far as I'm concerned.

Insurance companies are in the business of collecting premiums and paying claims, premiums rise to match claims, it's the customers who will absorb any losses.

If an insurance company could save you $300 a year by making sure none of your fellow customers had certain pre exisiting genetic problems, would you join that company, or pay the higher premium to the other company?

SirRumpole · 28 August 2017

Value Collector said:
If an insurance company could save you $300 a year by making sure none of your fellow customers had certain pre exisiting genetic problems, would you join that company, or pay the higher premium to the other company?

I don't believe people should be denied insurance for factors beyond their control.

A genetic predisposition does not indicate a definite outcome.

Value Collector · 28 August 2017

SirRumpole said:
I don't believe people should be denied insurance for factors beyond their control.

A genetic predisposition does not indicate a definite outcome.

But would you accept a test that allowed you to source cheaper insurance?

SirRumpole · 28 August 2017

Value Collector said:
But would you accept a test that allowed you to source cheaper insurance?

I refer you back to my original comment. The requirement to disclose the results of genetic tests to insurance companies deters people from having them and therefore results in the premium holder not taking up potential early treatment and therefore a longer life, which would be good for insurance companies as well as the premium holder.

bellenuit · 28 August 2017

SirRumpole said:
I don't believe people should be denied insurance for factors beyond their control.

A genetic predisposition does not indicate a definite outcome.

A genetic predisposition statistically does indicate a definite outcome and that is why insurers would have to raise premiums for everyone if those more likely to have health problems are to be covered at no additional cost. But I do agree that they should be covered by the public system or perhaps the public purse could pay the additional premium to have them in the private system.

SirRumpole · 28 August 2017

bellenuit said:
A genetic predisposition statistically does indicate a definite outcome and that is why insurers would have to raise premiums for everyone if those more likely to have health problems are to be covered at no additional cost. But I do agree that they should be covered by the public system or perhaps the public purse could pay the additional premium to have them in the private system.

* Insurers have taken the risk for decades without knowing about genetic tests and they are still in business.

* Premium payers have accepted the level of premiums for that time.

* Shareholders have accepted the returns.

There should be a limit as to how much companies should be able to invade your private space, they don't need to know every last item about people's private lives. Insurance is a risk, as I said they already win more than they lose otherwise they would not be in business.

bellenuit · 28 August 2017

SirRumpole said:
* Insurers have taken the risk for decades without knowing about genetic tests and they are still in business.

* Premium payers have accepted the level of premiums for that time.

* Shareholders have accepted the returns.

There should be a limit as to how much companies should be able to invade your private space, they don't need to know every last item about people's private lives. Insurance is a risk, as I said they already win more than they lose otherwise they would not be in business.

But there was no choice. Premiums have been higher than they needed to have been which may have deterred some people from taking out private policies. So those who did the right thing by insuring their own health have been penalised.

I agree that insurance companies should not be able to invade every aspect of your private space. But a predisposition to having infirmities that are costly to the insurer should be something they are entitled to know. And as I said, I am not suggesting they not be covered in any way, but either they stay on the public health system, or Government subsidises their additional risk premium if they are to be insured privately.

When one travels overseas, pretty much all travel insurance policies do not cover existing ailments. Should these too be kept secret with no repercussions if some costly overseas health event is a result of a pre-existing ailment?

Value Collector · 28 August 2017

SirRumpole said:
* Insurers have taken the risk for decades without knowing about genetic tests and they are still in business.

* Premium payers have accepted the level of premiums for that time.

* Shareholders have accepted the returns.

There should be a limit as to how much companies should be able to invade your private space, they don't need to know every last item about people's private lives. Insurance is a risk, as I said they already win more than they lose otherwise they would not be in business.

In the past people just got sick and died, however now more and more medical treatments are available, and they are very expense, now it's a great thing we can keep more people alive, but it does increase the amount of claims, the price of the claims, and the duration of the claims.

So medical insurance costs will continue to rise.

No I think if someone happens to be born with a genetic disorder that costs a $1,000,000 society as a whole should take care of that, putting the cost onto those families with health insurance just increases the cost of those with health insurance, and means more people will avoid it.

SirRumpole · 28 August 2017

bellenuit said:
When one travels overseas, pretty much all travel insurance policies do not cover existing ailments. Should these too be kept secret with no repercussions if some costly overseas health event is a result of a pre-existing ailment?

A pre existing ailment is a known condition, a genetic test is not a known condition. People who have a genetic pre disposition to a disease do not necessarily develope it.

As I have said at least twice now, if you punish people for having genetic tests then people won't have them, potentially increasing costs to the health system and insurers.

bellenuit · 29 August 2017

SirRumpole said:
A pre existing ailment is a known condition, a genetic test is not a known condition. People who have a genetic pre disposition to a disease do not necessarily develope it.

As I have said at least twice now, if you punish people for having genetic tests then people won't have them, potentially increasing costs to the health system and insurers.

But insurance is based on probabilities, so a predisposition to a disease will result in a certain percentage of that population eventually developing it. And if certain conditions result in significant costs to the health insurance industry, then they should have the right to mandate that those wanting health insurance test for those preconditions, if the science now allows it.

The health insurance industry has the right to vet potential clients just like banks and other lenders have the right to vet their potential clients.

Motor insurance policies now require higher premiums from those living in certain post codes, because statistically those areas have higher car thefts than others. If you park your car on the street rather than a closed garage your premium is also likely to be higher. Just like medical preconditions, where you live or where you park your car doesn't mean it will be stolen, but statistically over the population of insured, there will be more cars stolen from those postcodes or from street parked cars.

If society deems that unfair, then let society bear the cost of the increased risk through government backed policies or government subsidised policies.

Tisme · 29 August 2017

bellenuit said:
But insurance is based on probabilities.

No, its based on risk and actuarial science. It combines things like risk assessment, probability, mathematics in general, knowledge of business, demographics, lifestyle, risk mitigation, control measures, etc.

SirRumpole · 29 August 2017

If society deems that unfair, then let society bear the cost of the increased risk through government backed policies or government subsidised policies.

Sure, the government should get back into insurance and run it as a not for profit business.

Value Collector · 29 August 2017

SirRumpole said:
Sure, the government should get back into insurance and run it as a not for profit business.

You would be surprised by how little underwriting profit the industry makes.

As a whole the insurance industry generally pays out more in claims and expenses than it earns in premiums.

The insurance industry survives on interest it earns on its float.

SirRumpole · 29 August 2017

Value Collector said:
The insurance industry survives on interest it earns on its float.

And also this interesting piece that Life Insurance companies make money on lapsed policies.

http://www.huffingtonpost.com/wm-scott-page/the-life-insurance-indust_b_1937246.html

Value Collector · 29 August 2017

SirRumpole said:
And also this interesting piece that Life Insurance companies make money on lapsed policies.

http://www.huffingtonpost.com/wm-scott-page/the-life-insurance-indust_b_1937246.html

the insurance business is super competitive, and that keeps profit margins (if there are any), very small, the lapse ratio would already be taken into account, and used to reduce premiums charged.

The important number is the "Combined Ratio"

Thats the figure that tells what percentage of the premiums were paid out as claims and expenses e.g. a number above 100 means more than the total premiums collected were used.

2010 - 101.5%
2011 - 106.5%
2012 - 102.5%
2013 - 96.4%
2014 - 97.4%
2015 - 98.0%
2016 - 99.2%

As you can see on average it is pretty wafer thin margins, especially when you factor in that the later figures tend to get revised upwards over time, because some claims have long term payments,

e.g. the best year there is 2013, but it may not end up looking as good once all the payments add up over the next 20 years, on those longterm claims.

SirRumpole · 29 August 2017

Value Collector said:
the insurance business is super competitive, and that keeps profit margins (if there are any), very small, the lapse ratio would already be taken into account, and used to reduce premiums charged.

The important number is the "Combined Ratio"

Thats the figure that tells what percentage of the premiums were paid out as claims and expenses e.g. a number above 100 means more than the total premiums collected were used.

2010 - 101.5%
2011 - 106.5%
2012 - 102.5%
2013 - 96.4%
2014 - 97.4%
2015 - 98.0%
2016 - 99.2%

As you can see on average it is pretty wafer thin margins, especially when you factor in that the later figures tend to get revised upwards over time, because some claims have long term payments,

e.g. the best year there is 2013, but it may not end up looking as good once all the payments add up over the next 20 years, on those longterm claims.

Hardly worth them being in business its it ?

bellenuit · 29 August 2017

Tisme said:
No, its based on risk and actuarial science. It combines things like risk assessment, probability, mathematics in general, knowledge of business, demographics, lifestyle, risk mitigation, control measures, etc.

Yes, as I said, it is based on probabilities.

Value Collector · 29 August 2017

SirRumpole said:
Hardly worth them being in business its it ?

As I said, most of them rely on the interest earned on the funds (the float), while they hold them, So any increase or decrease in claims, is passed on to policy holders.

-----------------------

Warren Buffetts company Berkshire Hathaway is one of the biggest Insurance companies in the world, and his primary goal in the insurance business is to generate a large pool of "Float" which he can invest.

If his insurance companies collect $1000 in premiums, but end up paying out 102% in claims and expenses, he looks at it as being able to borrow $1000 at 2% interest.

If its a good year and he only has to pay out 99%, he looks at it as having being paid $10 to borrow the funds at 0% interest.

It's all about holding onto a large pool of float for the insurance companies, and keeping claims as close to the premiums as possible, increasing claims causes increasing premiums.

SirRumpole · 29 August 2017

Value Collector said:
It's all about holding onto a large pool of float for the insurance companies, and keeping claims as close to the premiums as possible, increasing claims causes increasing premiums.

If the insurance business is on such a knife edge , I wonder if it's a good idea that people rely on corporate entities to provide it, when they could go bust if faced with extraordinary circumstances. Better to have the governments doing it I'd say.

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