Author Topic: Which type of insurance has the best economics?  (Read 3542 times)

scorpioncapital

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Which type of insurance has the best economics?
« on: April 25, 2014, 08:48:07 AM »
From a purely theoretical standpoint, there are many types of insurance stocks and rates, is there one that has better economics?

There are

- Mortgage Insurance - monthly premiums, low risk of default, relatively predictable, very commodity like.
- P&C
- Reinsurance
- Speciality Insurance
- Auto insurance

etc...



T-bone1

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Re: Which type of insurance has the best economics?
« Reply #1 on: April 25, 2014, 08:57:29 AM »
I would say specialty insurance by a mile.

As a general example, take insurance on classic cars.  People who own classic cars tend to be wealthy and place a lot of importance on these vehicles, so they are willing to "pay up" in terms of premiums.  These people also tend to drive slowly and carefully and are generally super careful of anything happening to these cars, so they have much much lower claims rates.

I believe yacht and private aircraft insurance is similar, where the vessel is professionally maintained and piloted, but of enough importance to the owner that insurers can charge a high premium.

I expect pet insurance is also very lucrative.

ukvalueinvestment

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Re: Which type of insurance has the best economics?
« Reply #2 on: April 25, 2014, 09:03:51 AM »
Actually, I think you may be wrong about pet insurance.  Lloyds Bank in the UK recently pulled the product because it was making losses.  Basically it's because peoples expectations have changed.  In the past, most pet illnesses would end prompt them being put down.  These days, people expect their pets to get treated almost like humans.  So if a pet gets a serious illness, they expect it to get a great deal of care for as long as necessary.  However, people are only prepared to pay a fraction of human health insurance.

I used to work with a particularly annoying woman who used to take regular days off because her dog was ill and she had to take it to the vet!  I'm not talking about once or twice... many times. 
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ItsAValueTrap

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Re: Which type of insurance has the best economics?
« Reply #3 on: April 25, 2014, 09:31:08 AM »
Title insurance is ridiculously profitable for the mortgage originator.

When somebody buys a house, they often do not shop around for title insurance.  This allows title insurance to be sold at really high prices.  Usually the new homeowner will go with the title insurance company that the mortgage originator prefers (the paperwork is the fastest).  It's the originator that gets the bulk of the profits from title insurance as they take kickbacks/commissions from the title insurance company.
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watsa_is_a_randian_hero

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Re: Which type of insurance has the best economics?
« Reply #4 on: April 25, 2014, 09:34:01 AM »
I used to work with a particularly annoying woman who used to take regular days off because her dog was ill and she had to take it to the vet!  I'm not talking about once or twice... many times.

this is off-topic...but-

I can't understand that at all.  If you were wealthy, then do with it whatever you want with your pets.  But I can't understand people who spend so much time and money and personally invested their emotions into a pet when they can barely take care of themselves and their own family.

I view it as a luxury (just like a large should be viewed as a luxury).  If you are in the middle or lower class and wondering why you have no (or minimal) savings, look at your number of pets and children.  I can't tell you how many times I've heard friends with pets complain about money issues.  To take it a step even further, I don't understand why is acceptable to society that families might own pets with no restriction who are any sort of welfare, foodstamps, (& now) subsidized obamacare

ukvalueinvestment

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Re: Which type of insurance has the best economics?
« Reply #5 on: April 25, 2014, 09:41:22 AM »
I guess it comes down to a question around how you value pets.  Some see them as almost equal to humans.  Some see them as totally inferior and closer to being "objects".

Also, how should being able to "afford" kids affect how many you have?  Some would say that how much money you have shouldn't affect how many kids you have.
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Liberty

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Re: Which type of insurance has the best economics?
« Reply #6 on: April 25, 2014, 09:44:45 AM »
I used to work with a particularly annoying woman who used to take regular days off because her dog was ill and she had to take it to the vet!  I'm not talking about once or twice... many times.

this is off-topic...but-

I can't understand that at all.  If you were wealthy, then do with it whatever you want with your pets.  But I can't understand people who spend so much time and money and personally invested their emotions into a pet when they can barely take care of themselves and their own family.

I view it as a luxury (just like a large should be viewed as a luxury).  If you are in the middle or lower class and wondering why you have no (or minimal) savings, look at your number of pets and children.  I can't tell you how many times I've heard friends with pets complain about money issues.  To take it a step even further, I don't understand why is acceptable to society that families might own pets with no restriction who are any sort of welfare, foodstamps, (& now) subsidized obamacare

Pets are children proxies for many people. It's human nature and won't change, whatever the economics of the situation are.
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scorpioncapital

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Re: Which type of insurance has the best economics?
« Reply #7 on: April 25, 2014, 10:07:44 AM »
 I've experienced this  strangely enough in Google advertising. You can go for multi phrase keywords or strange combinations with high click through rate but like 5 clicks a month. You may even pay nothing for it and get a high return. Or you can go for a big generic keyword and get huge volume, expensive cost and try to make it up on your skill. It may even be huge volume and low cost and still be profitable. In the end, it always seems to come down to finding a niche. In this sense, I have to agree with the idea that some sort of specialty insurance is best.

What about re-insurance? Are the dynamics of that any different?

jay21

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Re: Which type of insurance has the best economics?
« Reply #8 on: April 25, 2014, 01:27:41 PM »
From a purely theoretical standpoint, there are many types of insurance stocks and rates, is there one that has better economics?

There are

- Mortgage Insurance - monthly premiums, low risk of default, relatively predictable, very commodity like.
- P&C
- Reinsurance
- Speciality Insurance
- Auto insurance

etc...

The economics change due to changes in the market.  It all comes down to pricing.  I would expect that niche markets/risks and large risks would have the tendency to be mispriced the most as in the case of the former the market is limited to specialized small insurers and in the latter to gigantic insurers e.g. BRK and AIG.
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yadayada

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Re: Which type of insurance has the best economics?
« Reply #9 on: April 25, 2014, 01:51:55 PM »
what about 1347 PIH? These guys operate in louisiana. seems ot be in a niche. Big insurers have moved out there due to recent large losses and rates are up.