Freakonomics Radio 537. “Insurance Is Sexy.” Discuss.
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Mar 23, 2023 In a captivating discussion, Amy Finkelstein, an MIT economist and co-author of "Risky Business," dives deep into the flaws of insurance markets. She tackles the quirky topic of why divorce insurance doesn’t exist and suggests a rebranding as marriage longevity insurance. Finkelstein explores adverse selection challenges and the impact of regulatory frameworks on health coverage. Using personal anecdotes, she highlights the complexities of insurance and shares innovative ideas for improving market efficiency and expanding coverage options.
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Adverse Selection in Insurance
- Insurance markets, unlike regular markets, are vulnerable to adverse selection.
- This means that the people most likely to buy insurance are those most likely to need it.
Co-op Board Example
- NYC co-op boards illustrate adverse selection: those who want to serve most are often those you least want.
- This is because they are often bossy, nosy, aggressive, and self-interested.
Insurance Mandates and Broccoli
- Mandates, like the one in Obamacare, can address adverse selection in insurance but face real-world challenges.
- Unlike grocery stores, insurers care greatly about who their customers are, making mandates less effective.
