Protocols for Insurance to Maintain Privacy
-----BEGIN PGP SIGNED MESSAGE----- [ To: Cypherpunks ## Date: 11/01/97 ## Subject: Protocols for Insurance to Maintain Privacy ]
Date: Wed, 29 Oct 1997 09:24:39 -0700 From: Tim May <tcmay@got.net> Subject: Protocols for Insurance to Maintain Privacy
There are interesting protocols which can be used to skirt statist laws about insurance. A la carte insurance, for specific illnesses, is one of the best examples. Thus, a heterosexual male who doesn't use IV needles can "opt out" of coverage for AIDS-related treatments, thus transferring the effective cost to those most worthy.
I can see practical problems with this (like finding out that the fine print on page 248 of my insurance contract turns out not to cover dog bites that occur on Thursdays), but it's really just letting customers buy only what they want.
This has similarities to crypto protocols. And anonymity. To wit, it is possible to arrange anonymous blood tests for various conditions. So, Alice arranges a distributed set of such tests, perhaps at multiple labs. When she finds she has no preconditions or precursors for Diseases A, B, C, and D, she opts out of being covered for these diseases.
One problem with this is that, if it becomes widespread, nobody will ever buy insurance for these diseases unless they have it or probably will get it. This kind-of defeats the point of having insurance, which is to protect yourself from low probability high cost things happening. That is, before I've taken the test for genetic disease X, my best estimate of the probability that I will test positive is very low. Once I have taken it, I know the result. If I sign up for a-la-carte insurance for this disease, the insurance company effectively knows I must have tested positive for a predisposition to it, and so either won't give me insurance, or will give me insurance only at an extremely high rate (corresponding to a 1/10 chance of getting the disease, rather than a 1/1,000,000 chance). On the other hand, information isn't free--I have to spend some money for each of the hundreds of genetic tests available. There may be a profitable business in providing a battery of genetic tests for a large up-front fee, in a sort-of inverse-lottery scheme--if you get unlucky enough to have one or more of these disease precursors, we pay your insurance costs, or at least give you a big bundle of money to spend as you will. This is subject to various kinds of abuse (if you know you're predisposed to get some disease, you have a strong incentive to enter the ``lottery''), but it still might work.
--Tim May
--John Kelsey, Counterpane Systems, kelsey@counterpane.com PGP 2.6 fingerprint = 4FE2 F421 100F BB0A 03D1 FE06 A435 7E36 -----BEGIN PGP SIGNATURE----- Version: 2.6.2 iQCVAwUBNF1ZdEHx57Ag8goBAQFZsQQA7NGzgc39WbyB8eACZN71wrBwOdapExNn fvn1aEFeHoLWZnHIcLHwzSuCiJ22I9kGK8Co88fDfjDebb+kzHj9oO4xpfMecHLr pjvKWfEDOnv5th6hxCmzKrA6OpuMqYgtvX9USRuO1oLckjX4mTc6jvEp6ZBD96vB uWvXhj1bPUM= =Vc/C -----END PGP SIGNATURE----- --John Kelsey, Counterpane Systems, kelsey@counterpane.com PGP 2.6 fingerprint = 4FE2 F421 100F BB0A 03D1 FE06 A435 7E36
At 10:02 AM -0700 11/3/97, John Kelsey wrote:
One problem with this is that, if it becomes widespread, nobody will ever buy insurance for these diseases unless they have it or probably will get it. This kind-of defeats
Such insurance is now common. A boat owner doesn't buy insurance for iceberg collisions if he is never in arctic waters, a small plane pilot doesn't buy cargo insurance if he doesn't ferry cargo, and so on.
the point of having insurance, which is to protect yourself from low probability high cost things happening. That is,
I have a different view of what insurance is than John does. What insurance is, and how it is priced, is too long a topic to get into here. Suffice it to say that the insurance company makes its profits by charging more for coverage than it pays out. And the customer, of course, tends to lose the differential. Each side tries to get as much information as possible. If Joe Client knows he never pilots a cargo plane, he doesn't opt for cargo insurance. If Joe Client knows he never engages in unprotected sex with diseasy prostitutes, etc., he skips HIV insurance. The fact that some "low probability events," like meteor strikes, are uncovered is part of the price of keeping Joe's premiums tolerable.
before I've taken the test for genetic disease X, my best estimate of the probability that I will test positive is very low. Once I have taken it, I know the result. If I sign up for a-la-carte insurance for this disease, the insurance company effectively knows I must have tested positive for a predisposition to it, and so either won't give me insurance, or will give me insurance only at an extremely high rate (corresponding to a 1/10 chance of getting the disease, rather than a 1/1,000,000 chance).
This is the idea. It causes those with the predilections to the disease to pay the high coverage costs. The alternative is not pretty: banning private testing (how?) and forcing insurance companies to cover all applicants for all conditions at a fixed rate. --Tim May The Feds have shown their hand: they want a ban on domestic cryptography ---------:---------:---------:---------:---------:---------:---------:---- Timothy C. May | Crypto Anarchy: encryption, digital money, ComSec 3DES: 408-728-0152 | anonymous networks, digital pseudonyms, zero W.A.S.T.E.: Corralitos, CA | knowledge, reputations, information markets, Higher Power: 2^2,976,221 | black markets, collapse of governments. "National borders aren't even speed bumps on the information superhighway."
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