Insurance [LWN.net]

Insurance

Posted Oct 19, 2017 15:47 UTC (Thu) by NAR (subscriber, #1313)
In reply to: Insurance by tialaramex
Parent article: KRACK, ROCA, and device insecurity

There are two small problems with your example:

1. These are (local) services. The (local) government could (more) easily regulate theme and you can't "buy" these services after they go out of business. So for example if I put my money into a foreign bank, the insurance in my home country will not cover me. I actually did have an account at a bank which was registered in a foreign country and they mentioned in all of their communication that my money is not covered by the local insurance (it was covered by the insurance of the foreign country). Also I can't go into a bank office after the bank shut down. On the other hand IoT devices are usually made in a different country and it is very much possible to find a device on the shelf of a local store where the maker is already out of business and thus no longer paying insurance.

2, These insurances increase the hurdle to enter the market. In the case of banks, it's probably not a bad idea. For holiday companies - I don't know. Here they don't have insurance (as far as I know), so from time to time there are news of some poor souls who are stranded somewhere. On the other hand the clients can (and maybe should) insure themselves. My wife is starting a (very) small business where an insurance is compulsory - and it's a real hurdle because initially it takes about 10% of the income (not from profit, from income).

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Insurance

Posted Oct 20, 2017 16:32 UTC (Fri) by tialaramex (subscriber, #21167) [Link]

The use of insurance is appropriate when businesses keep failing. If your wife's business is in a sector where new businesses routinely fail and leave personal clients out of pocket, well, I appreciate that it's tough finding the money but wider society has to prioritise ensuring nobody gets screwed over the inconvenience for your wife. In fact arguably the insurance, though expensive, is helping her because without it clients would have to assume her new untested business is likely to fail and stay away.

The idea that clients should insure themselves is inefficient. It can work when clients are all or mostly corporations, though it will usually be inefficient even then. But for ordinary consumers it's ludicrously inefficient. The acquisition costs per customer may be slightly lower, but the insurance has many more customers, so overall a lot more resource is wasted. Where possible laws should put insurance requirements onto the larger entity which will usually be the supplier.

We _could_ say that everybody living in my building needs to take out an insurance policy in case the building burns down. If it happens, the insurers all pay out, together we buy a new building, everything is fine. But that's very inefficient. What actually happens is much better, the building's owner (maybe all the residents jointly, in my case a brass plate company in a tax haven) has to buy insurance and post proof to all residents, and they bill everybody for a share of the insurance along with the other costs of running the building, like elevator maintenance and painting the corridors.

The US has a lot of deliberately anti-competitive policies which can give the idea of regulation a bad name, rather than compete by offering a better service it turns out it's cheaper to "persuade" politicians to pass a law saying nobody is to compete with you, or indeed not to pass a law which would render you obsolete (title insurance, tax filing, and dozens of other things that needn't exist but still do because the campaign donations roll in from those selling them). So I'm not suggesting that every type of business ought to have insurance against the consequences of failing, just that it's a sensible remedy if an industry has this persistent problem the way that banks, and package holiday companies do, and the other poster suggested IoT manufacturers might.

Insurance

Posted Oct 22, 2017 1:25 UTC (Sun) by ssmith32 (subscriber, #72404) [Link]

But a hurdle to enter the market isn't a bad thing - especially if you're not ready or willing to cover the long-term effects you might have on society. If you're not willing to pay a price to help protect society against the damages you may cause if you fail, I see a hurdle as a good thing, not a bad.

Externalities are a real thing.