When I hear of entrepreneurs excited about prediction infrastructure making businesses, I feel like they gravitate towards new prediction markets or making new hedge funds.
I really wish it were easier to make new insurance businesses (or similar products). I think innovative insurance products could be a huge boon to global welfare. The very unfortunate downside is that there’s just a ton of regulation and lots of marketing to do, even in cases where it’s a clear win for consumers.
Ideally, it should be very easy and common to get insurance for all of the key insecurities of your life.
Having children with severe disabilities / issues
Having business or romantic partners defect on you
Having your dispreferred candidate get elected
Increases in political / environmental instability
Some unexpected catastrophe will hit a business
Nonprofits losing their top donor due to some unexpected issue with said donor (i.e. FTX)
I think a lot of people have certain issues that both:
They worry about a lot
They over-weight the risks of these issues
In these cases, insurance could be a big win!
In a better world, almost all global risks would be held primarily by asset managers / insurance agencies. Individuals could have highly predictable lifestyles.
(Of course, some prediction markets and other markets can occasionally be used for this purpose as well!)
Some of these things are fundamentally hard to insure against, because of information asymmetries / moral hazard.
e.g. insurance against donor issues would disproportionately be taken by people who had some suspicions about their donors, which would drive up prices, which would get more people without suspicions to decline taking insurance, until the market was pretty tiny with very high prices and a high claim rate. (It would also increase the incentives to commit fraud to give, which seems bad.)
Some of these harms seem of a sort that does not really feel compensable with money. While romantic partner’s defection might create some out-of-pocket costs, but I don’t think the knowledge that I’d get some money out of my wife defecting would make me feel any better about the possibility!
Also, I’d note that some of the harms are already covered by social insurance schemes to a large extent. For instance, although parents certainly face a lot of costs associated with “[h]aving children with severe disabilities / issues,” a high percentage of costs in the highest-cost scenarios are already borne by the public (e.g., Medicaid, Social Security/SSI, the special education system, etc.) or by existing insurers (e.g., employer-provided health insurance). So I’d want to think more about the relative merits of novel private-sector insurance schemes versus strengthening the socialized schemes.
While romantic partner’s defection might create some out-of-pocket costs, but I don’t think the knowledge that I’d get some money out of my wife defecting would make me feel any better about the possibility
Consider this, as examples of where it might be important: 1. You are financially dependent on your spouse. If they cheated on you, you would likely want to leave them, but you wouldn’t want to be trapped due to finances. 2. You’re nervous about the potential expenses of a divorce.
I think that this situation is probably a poor fit for insurance at this point, just because of moral risks that would happen, but perhaps one day it might be viable to some extent.
> So I’d want to think more about the relative merits of novel private-sector insurance schemes versus strengthening the socialized schemes.
I’m all for improvements on socialized schemes too. No reason not for both strategies to be tested and used. In theory, insurance could be much easier and faster to be implemented. It can take ages for nation-wide reform to happen.
When I hear of entrepreneurs excited about prediction infrastructure making businesses, I feel like they gravitate towards new prediction markets or making new hedge funds.
I really wish it were easier to make new insurance businesses (or similar products). I think innovative insurance products could be a huge boon to global welfare. The very unfortunate downside is that there’s just a ton of regulation and lots of marketing to do, even in cases where it’s a clear win for consumers.
Ideally, it should be very easy and common to get insurance for all of the key insecurities of your life.
Having children with severe disabilities / issues
Having business or romantic partners defect on you
Having your dispreferred candidate get elected
Increases in political / environmental instability
Some unexpected catastrophe will hit a business
Nonprofits losing their top donor due to some unexpected issue with said donor (i.e. FTX)
I think a lot of people have certain issues that both:
They worry about a lot
They over-weight the risks of these issues
In these cases, insurance could be a big win!
In a better world, almost all global risks would be held primarily by asset managers / insurance agencies. Individuals could have highly predictable lifestyles.
(Of course, some prediction markets and other markets can occasionally be used for this purpose as well!)
Some of these things are fundamentally hard to insure against, because of information asymmetries / moral hazard.
e.g. insurance against donor issues would disproportionately be taken by people who had some suspicions about their donors, which would drive up prices, which would get more people without suspicions to decline taking insurance, until the market was pretty tiny with very high prices and a high claim rate. (It would also increase the incentives to commit fraud to give, which seems bad.)
Some of these harms seem of a sort that does not really feel compensable with money. While romantic partner’s defection might create some out-of-pocket costs, but I don’t think the knowledge that I’d get some money out of my wife defecting would make me feel any better about the possibility!
Also, I’d note that some of the harms are already covered by social insurance schemes to a large extent. For instance, although parents certainly face a lot of costs associated with “[h]aving children with severe disabilities / issues,” a high percentage of costs in the highest-cost scenarios are already borne by the public (e.g., Medicaid, Social Security/SSI, the special education system, etc.) or by existing insurers (e.g., employer-provided health insurance). So I’d want to think more about the relative merits of novel private-sector insurance schemes versus strengthening the socialized schemes.
Consider this, as examples of where it might be important:
1. You are financially dependent on your spouse. If they cheated on you, you would likely want to leave them, but you wouldn’t want to be trapped due to finances.
2. You’re nervous about the potential expenses of a divorce.
I think that this situation is probably a poor fit for insurance at this point, just because of moral risks that would happen, but perhaps one day it might be viable to some extent.
> So I’d want to think more about the relative merits of novel private-sector insurance schemes versus strengthening the socialized schemes.
I’m all for improvements on socialized schemes too. No reason not for both strategies to be tested and used. In theory, insurance could be much easier and faster to be implemented. It can take ages for nation-wide reform to happen.