<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>joosters</author><text>&lt;i&gt;The big problem seemed to be competition. You only get to write the insurance if you&amp;#x27;re the best price but the best price is not necessarily one that makes sense for the business.&lt;/i&gt;&lt;p&gt;A friend of mine worked for an insurer, their job was to model the risks and calculate insurance costs for various things. The problem was, it didn&amp;#x27;t really matter how clever or detailed their modelling was. If their risk model came up with too large a premium, management demanded that the pricing be made more competitive. So they ended up overriding their calculations with a whole heap of &amp;#x27;fudge factors&amp;#x27; to move their prices to be more in-line with the rest of the market. Kind of defeated the point of the modelling, really.</text><parent_chain><item><author>lordnacho</author><text>I actually had a chat with a friend about prize indemnity insurance, he&amp;#x27;s a Lloyd&amp;#x27;s guy.&lt;p&gt;In the end it&amp;#x27;s the law of large numbers, pretty much what a casino does: take lots of small positive bets, don&amp;#x27;t let one bet dominate. If you do get something too big, syndicate it with some of your competitors to spread the risk. Of course also make sure everyone who comes for insurance is actually what you think, like the guy in the article says it&amp;#x27;s not necessarily a hugely detailed check but it is enough to stop the worst frauds.&lt;p&gt;You want a model that&amp;#x27;s robust, and you only have so much data about how often some guy hits a hole in one or a half court shot, and there&amp;#x27;s only so much you can know about whether they are a pro and the distance to the hole.&lt;p&gt;The big problem seemed to be competition. You only get to write the insurance if you&amp;#x27;re the best price but the best price is not necessarily one that makes sense for the business. If some guy is buying market share with a loss leader, what do you do? Every segment of the market could be affected by this at a given time.</text></item></parent_chain></comment><story><title>The strange business of hole-in-one insurance</title><url>https://thehustle.co/the-strange-business-of-hole-in-one-insurance/</url></story>
<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>danielmarkbruce</author><text>This last part is true of any insurance. And it&amp;#x27;s not just buying market share which can cause it - pure stupidity can too.</text><parent_chain><item><author>lordnacho</author><text>I actually had a chat with a friend about prize indemnity insurance, he&amp;#x27;s a Lloyd&amp;#x27;s guy.&lt;p&gt;In the end it&amp;#x27;s the law of large numbers, pretty much what a casino does: take lots of small positive bets, don&amp;#x27;t let one bet dominate. If you do get something too big, syndicate it with some of your competitors to spread the risk. Of course also make sure everyone who comes for insurance is actually what you think, like the guy in the article says it&amp;#x27;s not necessarily a hugely detailed check but it is enough to stop the worst frauds.&lt;p&gt;You want a model that&amp;#x27;s robust, and you only have so much data about how often some guy hits a hole in one or a half court shot, and there&amp;#x27;s only so much you can know about whether they are a pro and the distance to the hole.&lt;p&gt;The big problem seemed to be competition. You only get to write the insurance if you&amp;#x27;re the best price but the best price is not necessarily one that makes sense for the business. If some guy is buying market share with a loss leader, what do you do? Every segment of the market could be affected by this at a given time.</text></item></parent_chain></comment><story><title>The strange business of hole-in-one insurance</title><url>https://thehustle.co/the-strange-business-of-hole-in-one-insurance/</url></story>