Thinking: the internet will crush businesses that rely on information asymmetry or opacity. Some biz models depend on occasional "bargains," like hiring a 5x dev for a 2x salary, or insuring a 5x safer driver for 1/2 the premium. These models will struggle more & more over time.
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Given this sketch of the actuarial reality (which I may be wrong about), the safe driving discount is basically indistinguishable from "20% off if you're a Colts fan." Which is a reasonably marketing promotion in auto insurance! It gets you the float of typical risks ~cheaply!
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I'm skeptical that there's not much signal beyond age, gender, and zip. How about # of miles driven (Metromile)? Do you mostly drive highways or streets? At rush hour or off-peak? How many accidents have you had in the last 10 years? Do you drive solo, or w/3 passengers? Etc.
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Auto insurance (in California) is regulated to consider only those parameters (including miles driven) with only some minor influences for social associations. Auto insurance is a transfer from higher income drivers (with fewer collisions) to lower income drivers.
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So is their edge entirely from investing the float?
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Do you mean competitive edge is from better investment selection? That strikes me as unlikely. Do you mean "Does their money come from investing the float?" Oh, unambiguously yes. The combined ratio of an auto insurer is +/- 100; every $1 in premium goes to a claim or expense.
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