Comments on: Car Insurance and an Ear Full of Cider

By: Daniel Reeves

Daniel Reeves — Fri, 01 Apr 2016 00:27:00 +0000

In reply to entirelyuseless. Good point. And agreed that insurance is rational in that situation! I still think they weasel as much as they can though.

By: entirelyuseless

entirelyuseless — Thu, 31 Mar 2016 21:22:00 +0000

It is not illegal to know more than the insurance company, if you are not responsible for causing the thing you are insuring against.

I know someone who bought temporary health insurance because he was living in a house where two people had just been hospitalized with a potentially infectious disease, with their hospital stays costing thousands of dollars. Two days later, he came down with the same thing. It was entirely legal: he had to sign a statement saying that at the time he bought the insurance, he had no symptoms which would cause a reasonable person to consult a doctor. It was the complete truth. He simply knew that he was likely to get sick for other reasons.

The insurance company paid for his hospital stay, as required by their contract.

By: Stone Glasgow

Stone Glasgow — Sun, 04 Mar 2012 05:41:09 +0000

Your line of reasoning is valid, but change is only an option for people who own their cars free and clear. Most people in the United States buy their car using a bank loan, and they are required to carry collision insurance by the bank.

By: dreeves

dreeves — Fri, 09 Dec 2011 16:16:53 +0000

@Liam, I see, yeah, I guess the way to disambiguate it is to say $100k is the max *coverage* but the $2k is a bonus or penalty on top of whatever the coverage is (I think that was the natural interpretation!). Or scrap the “max coverage” part. $100k is just the max you can write down.

Oh, and note that even if the insurance company pays $99k and $101k they are in fact paying the max of $100k *per claim*. So just think of the $2k not as an adjustment to the coverage but as a transfer between the two claimants.

By: Liam Carton

Liam Carton — Fri, 09 Dec 2011 14:29:08 +0000

@dreeves. Sorry, but I don’t agree. the satement in the original puzzel was that there was a 100K cap on the payment. Therefore my assertion that 100K was the maximum payout is true. So if person a says 100K and person b says 99K then a will get 98K and b will get 100K, NOT 101K. So they go for 99K for absolutely no benefit!

Therefore the logical choice is for both a and b to quote 100K.

Sorry, but that is what the puzzel says. Of course b could go 98K, but again they gain nothing over quoting 100K, except to screw a out of 4,000. Still not rational.

Cheers

Liam

By: JoeK

JoeK — Thu, 27 Oct 2011 05:18:08 +0000

Sorry, I guess I’m not maximizing utility for the insurance company. Poor dears. I expect they’ll survive.

By: JoeK

JoeK — Thu, 27 Oct 2011 05:13:51 +0000

The optimal algorithm I can use, under the assumption that the opponent is equally rational and will cooperate, is to choose $100K. If I calculate the expected mutual value of each possible choice given the assumption of a cooperating counter-party, total utility is maximized at $100K. Further, “Not being a dick” is an important term in my personal utility function. So I really don’t care if I get 97 and she gets 101, or whatever.

By: Daniel Reeves

Daniel Reeves — Tue, 18 Oct 2011 20:29:30 +0000

@Army1987, same in the US. Liability insurance is mandatory. This article is just about collision insurance, namely, insuring against damage to your own car.

By: Army1987

Army1987 — Tue, 18 Oct 2011 19:44:13 +0000

In my country, civil liability insurance on cars is mandatory.

By: Unknown

Unknown — Wed, 24 Aug 2011 18:36:16 +0000

I know someone who bought temporary health insurance after several other people in the same building came down with a serious illness that required hospital stays costing thousands of dollars.

The day after he bought the insurance, he came down with the illness.

I guess this falls under reason 1.