DNA of relative indicts man, cuckolding ignored

[Tim May]

On Tuesday, July 8, 2003, at 02:55  AM, Vincent Penquerc'h wrote:

>> When AAA Insurance meets with Joe Sixpack to discuss his
>> health or life
>> or earthquake insurance, they seek to collect enough information to
>> have a reasonable chance of turning a profit on the deal. Else why
>> would they exist as a business?
>
> But there is a necessary asymmetry here. If you could determine
> with good precision whether someone will be affected by an illness,
> when, how much, etc, then this wouldn't work, save for superstition
> on the part of Joe Sixpack. Since the contract is based on a bet on
> the likelihood of premium/payouts balance, the more you can find
> out about the future of the insured person's organism future, the
> closer the premiums will match the payouts, reliably. *IF* you can
> determine this, of course.

Sure, this is what "price discovery" is all about, in many contexts and 
in many markets. "Reasoning with incomplete information" is the basis 
for just about everything. Animals reason without complete information, 
insurance companies reason without complete information, we all do.

I don't claim either party in an insurance contract knows the future, 
or even knows the probabilities of things happening.



> So the goal will be for the insurer to
> get access to as much info as possible to assess how to set the
> premiums, while preventing the insured from knowing as much, so
> there is still the uncertainty and the value of "peace of mind"
> gotten by the insured, and that's worth something too.
> The converse is also true. And both raise the problem of assessment
> of the data - how does the insurer get the data (getting DNA from
> the would be insured ? with the insured's knowledge or not ? From
> the contract clause that subordinates the insurance to the supplying
> of the data by the insured ? Will credit bureaus expand to cover
> this kind of thing ?)
> If there is total symmetry, insurance loses its point entirely.

Knowing a lot about DNA still doesn't mean the future is known...when 
or if pregnancies will occur, when or if a fall from a cliff will 
occur, or, obviously, when some rare disease will appear.

Insurers already seek maximum information. This is their "right" (in 
the sense that the signing of an insurance contract is a mutually 
uncoerced transaction).

> Could we see a gradual disappearance of some sorts of insurance
> for events that cease to be probabilistic ?
> Just musing. All of it already happens, but I'm curious about the
> limit of it (in the mathemetical sense) when the precision of the
> prediction tends towards infinity.

As I said, many corporations choose to self-insure. Partly because they 
can carry the costs of coverage of rare events themselves, partly 
because they have excellent estimates of what ranges of events are 
likely to occur.

Insurance has been in a process of evolutionary learning and better 
estimation for decades, even centuries. It shows no signs of going 
away. In fact, better estimation of risks has generally led to more and 
more refined kinds of insurance, even niche market insurance. Let me 
give an example:

A friend of mine just told me that his very elderly parents had to be 
flown home, with a medical attendant, from St. Petersburg, Russia to 
San Francisco. I don't know the full details, as his comment was in an 
e-mail message, but I know his parents were on some kind of Baltic Sea 
cruise. My friend said the emergency flight home was very expensive, 
but that his father had for the first time purchased "trip insurance," 
so the costs are covered. This kind of insurance didn't exist in the 
1950s, that's for sure.

More information means someone thinks they can make a buck making a 
certain kind of bet. Sometimes they bet wrong, except betting wrong is 
part of the scheme.

The larger issue is that these transactions be uncoerced.

The crypto significance may be a bit abstract, but it's related to 
selective disclosure of information, e.g., uncovering one of a series 
of covered coins, or showing a hand of cards. Alice and Bob play 
various games, sometimes buying disclosure of bits of information. "All 
crypto is economics" is just another way of saying the world and people 
in it do not have perfect information about the state of others, about 
their intents, about the future.

Both investors and actuaries are in the business of trying to estimate 
and predict better than others.

--Tim May
"Ben Franklin warned us that those who would trade liberty for a little 
bit of temporary security deserve neither. This is the path we are now 
racing down, with American flags fluttering."-- Tim May, on events 
following 9/11/2001