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Mercury Spill (jefftk.com)
764 points by luu on Oct 8, 2015 | hide | past | favorite | 359 comments

It may have cost you $50,000 but you now have +50 karma on HN and rising. Some would say a bargain! ;-]

In all seriousness, cool story, glad you're okay, and this makes me think "insurance" as a business needs to be re-thought entirely. How many times has it happened that insurance companies weasel out of paying? Objectively you might think THAT was their primary job.

Insurance is such a scam. A friend of mine made two claims within about five years: once for water damage and once for a burglary.

The insurance company agreed that she was covered. So they paid her and then dropped her. No big deal, right? Wrong. Once you've made a claim or two against your insurance, it can be very hard to get any new insurance company to cover you. She finally did find a new insurer, but the price has gone way up -- negating her original claims.

Did you know every claim you make goes into a CLUE report? It's like a credit report, but few people know about it. Once you make "too many claims" - even if they're legit and beyond your control, you become an insurance pariah.

Because of this, I avoid making any claims unless absolutely required.

No shit. What's the point of buying insurance then? I had septic tank back flow into my basement due to a design defect that was put in PRIOR to my purchase of the house.

Insurance paid up then dropped me. Second insurance doubled the premium stating I'm a high risk. I was like WTF? This was a design defect that has been fixed. It's not like I'm a slob and let the house fall apart. It's a relatively new house.

What's even dumber is the 'claim' followed me to two more houses over the next eight years. WHY? It's not like I have a magic wand and caused the pipes to bend and cause another back flow. I argued with the current insurance company as high as I could until they agreed to reduce the premium to a level I'm comfortable with.

It sucks.

The underlying problem is that insurance companies are allowed to segment their customer base by risk. For low risk customers this is great because they get a cheap rate. For the companies it's great because they get to advertise a cheap rate and attract customers (and run really lean administratively... don't need a lot of claims handlers etc).

Things go off the rails though for customers perceived as high risk. Grouping all these folks together means a higher rate, possibly quite a bit higher.

The use of prior claim history as a risk measurement seems like a very cheap way to do underwriting. This feeds into being able to offer the cheapest offering... no need for experienced and qualified underwriters... which means a cheaper product.

The original goal of insurance, shared risked, has been somewhat eroded by this.

Isn't the problem that the government, which is supposed to uphold justice, let's it go on?

What's justice got to do with anything? Insurance is a service, offered by a private entity to a private entity. You pay more in insurance than you're expected to pay for damages over a lifetime, but you get the peace of mind that comes from knowing you're not going to be bankrupt by an accident.

Sure, most industries benefit from a bit of regulation, but from that to "justice" is a long road.

That's an interesting twist.

Health insurance is somewhat the same too... Hospitals and Dentists have special rates for insured patients (much higher)... you can end up paying the same as an uninsured patient... Which is why I was getting hospitalization-only insurance, but with Obama-care, I can't do that anymore.

Also, I have been told that it might be illegal to claim that you are uninsured, pay the bill and then get reimbursed by your insurance company to avoid surcharges... not sure if that is true.

> Health insurance is somewhat the same too... Hospitals and Dentists have special rates for insured patients (much higher)... you can end up paying the same as an uninsured patient...

Health insurance is actually very different[0]. The flow of money with medical billing is really, really complicated, which is why we end up with a system that's so confusing that even most physicians and clinicians don't really understand it.

Hospitals are generally not legally allowed to have higher rates for insured patients; this is actually why the sticker price for uninsured patients is so high. Hospitals use those high prices as a starting point to negotiate lower prices with insurers. (As an uninsured patient, you can almost always get the hospital to knock off 90% of a large bill for this reason; they really don't care what you pay, and they'd rather negotiate a smaller bill with you than have you default).

I could go on a long rant about the indirection of the medical billing system and all the problems it leads to, but I'll save that for another time.

> Also, I have been told that it might be illegal to claim that you are uninsured, pay the bill and then get reimbursed by your insurance company to avoid surcharges... not sure if that is true.

Yes, this is fraud. (It also happens to be a pretty bad example of fraud, since it's probably going to end up costing you more money, but it's still fraud).

[0] Strictly speaking, health insurance isn't really 'insurance', even though we talk about it and price it like it is, because one of the primary functions has nothing to do with smoothing risk.

That's interesting. You are forced to mention any health insurance you might have?

That's not particularly unusual.

You're forced to mention any car accident you've had to your insurers, even if you didn't claim for it. (At least, this is true in UK, not sure about US.)

Its a public record in the US iirc so there isn't a "need" to mention it as the insurance company can look it up. They can also do so with various tickets/violations. [e.g. moving violations]

That's very strange. Not saying it didn't happen to you, but to my knowledge, most medical professionals charge insured patients much LESS than insured ones, because insurance companies negotiate special rates.

My wife had to have an intensive surgery a few years ago. The total bill amounted to over $100,000. Insurance negotiated it down to $25,000 or so, and then paid 90% of the balance. That's pretty typical of my experience.

I see no reason that you couldn't tell the doctors that you are uninsured, negotiate it down on your own, pay the bill, and then submit it to insurance for reimbursement.

There are definitely clinics that give cash patients a 50% discount; I've been to several. The reason is obvious: they get real money rather than a several-month back-and-forth with various unhelpful assholes at an insurance company. That's why the prices are so high to start with. I think that if such a provider isn't careful it can get into trouble with its PPOs, because their contracts require that they get the "best" prices. However, it seems that if a provider is careful it can just say that it has a discount for the uninsured poor.

> give cash patients a 50% discount

> That's why the prices are so high to start with.

I feel like health insurance prices are too high by a factor noticeably larger than 2 though.

I had a big name health insurance company through a company policy which actually mandated that I pay a certain minimum for drugs purchased at the pharmacy. If I used the card and bought a generic which would normally cost say $9, I'd pay $20. Use the card, pay more than retail.

> What's the point of buying insurance then

Unfortunately, just like for many things, government makes it mandatory to buy insurance for many of your properties. So the scam can go on and on forever.

Which government requires insurance on a private home?

Mortgage lenders make homeowner's insurance a condition of the loan to protect their assets. I've never heard of a state requirement for homeowner's insurance.

I'm in the US, though. Might be different elsewhere.

Shared ownership properties, such as flats in tenements in Scotland and the UK (known as condominium ownership in the US, I think) require buildings insurance, as a fire or other damage to the fabric will affect other parts of the property.

This is codified in law by parliament as the Tenements (Scotland) Act 2004, Section 18, Obligation of owner to insure - http://www.legislation.gov.uk/asp/2004/11/section/18

It also makes sense that a bank would require a homeowner to have insurance. The bank gets all the benefits and the homeowner takes all the risks, in the form of payment costs and CLUE report liability.

Who are these "mortgage lenders" you speak of? It's all Fannie Mae and Freddie Mac and they set the underwriting requirements which include property insurance.

[1] - https://www.fanniemae.com/content/guide/selling/b7/3/02.html

OK, fine; I am speaking of those entities who originate and collect payment on a home loan. You pointed me to a government-sponsored enterprise that places an insurance stipulation in the terms of its voluntary contract with lenders who wish to guarantee or pass-through their loans.

Granted, almost no one will originate a subprime loan these days, because everyone in the private-label MBS business got out or was bailed out, so the best this example shows is a de facto standard set by the guarantor of last resort.

I own a non-warrantable property where Fannie Mae and Freddie Mac will not buy the mortgage. The bank still requires property insurance. Property insurance is not something invented by them that banks would not require otherwise.

Fannie Mae and Freddie Mac manage only about 40% of the mortgage market in the United States. Now, that's big enough to have a significant effect on the entire rest of the market but they do not control the entire mortgage market.

Parent is probably referring to the secondary mortgage market (mortgage-backed securities), of which F&F now control more like 90%.

"Because of this, I avoid making any claims unless absolutely required."

This is economically efficient behavior - and in fact you should set your deductible to the highest amount you can afford out-of-pocket, as insurance is really only efficient for amounts above that. You should be aiming towards insuring catastrophic loss - eg, a fire that burns your whole house down.

Yes, self insurance is always better if possible, since that means your cost is exactly equal to your risk. When you buy third party insurance, your cost is going to equal your risk + profit + overhead for the insurance company.

You self insure when you can afford the max cost you could incur (e.g. You could buy a new car if you had to.) You buy insurance when you can't afford the rare but very costly catastrophic loss - life insurance, health insurance, car injury insurance.

When renting a car, I don't usually take the insurance to reduce the excess from $5,000 to $0. However, I wonder whether rental companies are then keener to take note of a little scratch, especially when it was preexisting but gone unnoticed at initial inspection.

AFAIK most credit cards (Costco AMEX) will insure your car rental and luggage during travel. Out here in California and probably at most popular airports, the only things they look for are large dents.

Not in my limited experience. I was surprised how little the guy seemed to check when I dropped the car off.

Depends on the area. Renting in midwest suburbs, they pointed out and wrote down every tiny scratch in a walkaround before I picked up the car. Renting in New Jersey, the car looked like it had been beaten with a baseball bat, they didn't mark anything down on the damage report.

Insurance in my understanding is good for catastrophic events. If house burning down happen in 1 of 10000 homes in a lifetime, and all have taken insurance. For a small sum, you have ensured that you'll not be homeless, instead of each 10000 owners saving enough for a new house.

In case of large scale catastrophic events, insurance companies cover shit, though. It only works if you are the rare case and if you meet all the criteria marked in the fine prints that the insurance agent is careful never to explain.

Exactly this. I've worked with insurers and the first step to any claim is working out the cost of fighting the claim versus paying up. I wrote part of the system for managing estimates. You're only going to win easily if the claim value is cheaper than their lawyers fees.

So we can't really trust even in insurance for big things?

Fuck it. Who can we trust with anything nowadays?

Move out of the US.

Much better in Europe. Never had any issue with any of the claims to my insurance company, and price did not go up.

They even provide legal support for incidents outside home. I had a bike crash, and they took all the required paperwork and settled with the other part without me paying a dime.

I'm in Poland. But I guess given how everything is international now, I doubt EU has it any better than the US.

If you're below middle class, large corporations (banks, insurance companies, media providers etc.) are most likely able to treat You as they please. While it's really hard to blame the less wealthy, given our history. I think this is worldwide: If you're not able to protect yourself, no one will.

I'm in the UK. It's no better here or in Europe.

I wouldn't use it as a safety net myself these days, just a dice roll.

Good question. After working in insurance and finance for about 15 years, not those two sectors for sure.

You don't need to be fully self insured. I have my auto insurance deductible at $1k. So I'm self-insuring up to $1k of damage.

This is actually what we did: $5k deductible, filed for this once it was clear it would be well over $5k. But we missed a step: check the policy before you file to confirm that the policy actually does list coverage for the loss.

The bigger scam is that getting the insurance claim denied will probably still either raise his rates or drop him altogether.

This is a pretty extreme case of a household hazmat issue. 99/100 times, the pragmatic answer is to maintain deniability, make it as safe as possible and get out if necessary.

> ...the pragmatic answer is to maintain deniability, make it as safe as possible and get out if necessary.

Seriously? Pragmatic, yes. But am I reading you correctly? It sounds like your suggestion is to simply sell the house to someone without telling them about the mercury, exposing them to danger, and then prepare to lie about knowing it was there if they do discover it (hopefully not the hard way) and come after you.

I mean, nice to make it "as safe as possible," I guess, but you still seem prepared to expose people to conditions that are, nonetheless, totally unsafe in order to get out of paying to fix the problem. (Not to mention the fact that now they have to pay to fix the problem.)

In other words, you agree completely. Grandparent never said that following the pragmatic path in this case would be morally defensible and almost certainly believes that it wouldn't be (except in the sense that the human capacity for rationalization is nearly infinite and so a person stuck in the situation would likely manage to convince themselves otherwise). I get the sense that the grandparent post was complaining that by allowing insurance companies to exclude events like this we've created a terrible moral hazard.

It's a tough choice between being a scumbag and paying two years salary[1] out of pocket for something that was not your fault and that the insurance apparently doesn't cover because they are scumbags too.

[1] The median wage in the US per person is $26,695.

I find the intuition that the insurers are scumbags interesting (not that I don't share it, on some level). After all, in this case they also didn't cause the problem, don't own the house, and never agreed to insure the homeowner against that kind of risk. What am I missing?

Of course, its important to distinguish this situation from cases where the insurer did agree to cover it, but refuses to pay anyway.

Homeowners insurance is supposed to cover general risk. But over the years they have become increasingly aggressive at lobbying state insurance commissions to accept more and more exclusions to standard policies. This behavior correlates with a shift from mutually owned companies to corporate entities.

They are scum because they happily collect their premium, and actively undercut the costs of the policies to maintain profitability in the short term. They also screw with people for claims they owe. In a case I'm aware of near my home, the insurance company low balled a fire claim by 30% for quick settlement, forcing the homeowner to roll the dice in arbitration.

The true villain in this story is the home inspector who was incompetent enough to miss a decommissioned upfeed hot-water heating system, a sure indicator of the presence of elemental mercury in the home.

Home inspectors are by and large useless. They exist because the laws say they must exist, but they don't have a strong regulatory body making sure that they're competent. Once the house is sold they're gone.

For the most part they're just yet another guy who takes a cut whenever a house is sold.

Isn't a situation like this exactly the reason why one would have insurance in the first place? What other options does a homeowner have? Is there some second insurance policy they can buy to cover the numerous holes in the first?

I didn't say that.

This is one of the cases where you're screwed and need to remediate. Typical household hazmat issues are stuff like lead paint, asbestos, etc. All of which can be stabilized (for example, you can encapsulate lead paint and personally dispose of asbestos in municipal trash) without shelling out money you don't have on remediation services that are often ineffective, and also make it clear that you were aware of the issue.

In this case for example, every neighbor saw the clean harbors guys in spacesuits at his house. When he sells the house a decade from now and the new owner finding more Mercury somewhere, the old lady across the street will tell the new owners, and this person may be sued, even though he nearly bankrupted himself on cleanup. So whenever you can maintain ignorance, you should.

Ideally you would sell it to someone with a subprime loan they can walk away from. They never make any payments, the bank repos the house. Somehow the hazmat is discovered and the bank is compelled to fix it in order to sell the house, or at an even steeper discount because of remedied hazmat. Win win!

So, sweep it under the rug and sell the house without disclosure? That is a hell of a liability you open yourself to. Even if I felt pretty clever about eluding that responsibility, I'd rather roll the dice on the hazmat costs than take that hit to my self-respect.

Basically, thanks to CLUE, you only really get to use insurance once. Take this into account when thinking about your premiums and any claim you consider making. Insurance is for the big fire that takes it all. Also (in my experience), hire a lawyer who's wise in the ways of insurance weasel-speak to shepherd your claim. They're worth more than their fee in additional payout.

Lastly, always investigate how hard it will be to get insurance on a property you are considering buying. Water and/or mold damage claims typically remain against a property in the CLUE indefinitely.

> She finally did find a new insurer, but the price has gone way up -- negating her original claims.

This isn't a scam at all. That's exactly what you'd expect from insurance. Insurance isn't there to save you money. In fact, the expected value of an insurance plan is always going to be negative on an infinite time horizon[0].

The whole point of an insurance plan is to smooth risk: instead of the small possibility of a catastrophic failure, you take the relative certainty of having a fixed monthly payment (your premium). At a very high level, it's sort of similar to taking on consumer debt (credit card debt): in the long run, you'll always pay more than if you just paid cash up-front, because of the interest. The difference between credit cards and insurance is that you don't know when the expensive event is going to happen, so you agree to always pay the monthly payment regardless of what happens. And while banks charge interest based on the risk that you won't pay back and the opportunity cost of that money, insurers charge you a premium in exchange for the luxury of not having to guess whether next month will have an expensive event or not.

In your friend's case, the fact that she had two claims adjusted her relative risk profile, which means that her premium had to adjust accordingly.

[0] If it weren't, there'd be no point to going into business as an insurer, because you'd be guaranteed to make an operating loss. The only way you'd be able to make any money is based on the investments that you make, at which point you might as well eliminate the insurance side of your business and operate as a bank. (Interestingly, this is why the relationships between banks and insurers are so close in many countries, and also why most insurance markets - car insurance and health insurance[1] being two notable exceptions - have surprisingly slim profit margins).

[1] Health insurance is a special case because, strictly speaking, it's not really "insurance", but that's a whole separate discussion.

What? The point of insurance is to pool risk. The expected value of insurance is not automatically negative. Look up the term "actuarially fair". Yes, there is moral hazard in insurance and it is sometimes necessary to exclude bad actors to prevent markets from unraveling, but to not to the extent which has become common in many sectors. Your whole post reads like an specious apology for bad behavior in the insurance industry.

> The expected value of insurance is not automatically negative.

I'm curious how this math works. In my (quite likely incomplete) mental model of insurance, there are only a few terms: premiums, payouts, profits. It would seem that they have to balance. So if you pool risk, you are summing the payouts. Those payouts are covered by the sum of premiums. Any profit is the sum of premiums minus the sum of payouts.

Profits = Premiums - Payouts

Is this right so far?

Because then it seems that the expected value of insurance to the customer is the negated value of the expected profit of the insurer. Put another way: if the expected value of insurance is not negative, shouldn't the insurer raise premiums or exit the business?

Again, I know next to nothing about insurance and I'm asking to learn.

Insurance companies need a lot of cash on hand to cover low probability events. However, they can invest this money, so things like life insurance where risks increase over time but the premiums are fixed, can end up with a higher average payout than insurance premium, the difference being time value of money. In other words you end up paying the opportunity cost, but not nessisarily a nominal cost in the long term.

If money has diminishing marginal utility (to the insured) then insurance can have both positive expected utility for the insured and positive expected profit for the insurer.

> The point of insurance is to pool risk.

The point of insurance is to smooth risk, not to pool it. Pooling risk is not the point of insurance as a product; it's the mechanism by which that product (risk smoothing) becomes feasible as a business model.

> Look up the term "actuarially fair".

There's really no need to condescend by telling me to look up basic terminology; I am quite well-versed in this topic.

I didn't bring up moral hazard in this post, because it actually isn't necessary to explain why insurance has a negative expected value (which is equivalent to the statement that premiums are always non-zero[0]). It sounds like you're confusing a few different concepts here.

[0] Moral hazard is generally addressed by deductibles, not by premiums.

Could you ELI5 it all then, please? I was always under the impression that the whole point of insurance is that expensive accidents don't happen to everyone, so if everyone pays a little regularly, then there's enough money to both pay out the ones who end up having an expensive accident AND for the insurer to make money.

On an infinite timescale it may not add up but it surely can on any practical one, right?

The best description I've seen is that insurance is peace of mind.

from an individual perspective, insurance means you don't have to worry about unexpected expenses from things beyond your control (ie, peace of mind).

Now, the mechanism by which this is achieved may be described as a pool in that it's a single company with a pool of money that everyone pays into and the input into that pool necessarily must be greater than the output.

But from the "customers" perspective, insurance is peace of mind. ie, it smooths their total risk over time.

"Peace of mind" is false advertising, you should not expect insurance to provide that to you.

You will always have to worry about unexpected expenses, because insurance companies are never going to insure everything that could possibly happen, even if you get a good policy that doesn't dick you around on claims.

If you are expecting insurance to protect you from not knowing the risks, then you are taking a much bigger risk than not having insurance at all, because of the complacency that the belief you're insured engenders.

We have a whole subthread here about how insurance companies will refuse to pay when push comes to shove; I don't really believe in the peace of mind anymore.

What I'm looking for is the ELI5 for what insurance really is about (especially from the POV of insurers) given that, if I understand correctly, 'chimeracoder is disputing the insurance-as-everyone-pooling-money model.

For some definition of "reall", amirite?

people and business purchase insurance to cover unexpected loss, ie, "peace of mind".

Maybe insurance companies are evil scumbags, but that's STILL the reason why people PURCHASE insurance.

I'm a tad disappointed that people are downvoting you on this. It sounds like you have quite a bit of knowledge in this area, and if you are wrong, I'd prefer if the individuals actually commented how/why you're wrong, and back it up. It would yield more information/insight to all of us reading the discussion.

Right, the risk is pooled, the funds are pooled.

But everyone seems to forget that there's a huge part of that pool taken by the things sitting in the insurance office's chairs.

While I agree with you that you should only insure the risk you can’t carry yourself there should be a profitable business opportunity insuring individuals that have been dropped by other companies provided the reason from the drop is not predictive of future risk.

I am pretty sure that insurance companies know this. I bet that they have data showing that, even in cases where it seems like the cause of a claim was outside a person's control, that person is still more likely to make a second claim than someone who has never made a claim.

Yes, because at the very least the person has demonstrated the ability to file a claim. This alone makes them a higher risk.

And no, I'm not kidding.

I would think so too, but I would not be surprised if there is some sort of industry wide collusion to not try and change the situation. The key is separating out the risks that are truly higher from those that are not. If they are applying this as a blanket policy on all claimants it suggests that collusion is the culprit.

Or it suggests that the extra work needed to differentiate between the truly higher risks and those who are not is cost prohibitive. It may be more cost effective to just stick with the blanket policy.

This is exactly the reason. Big-name insurers trade in volume business. The more they standardize the product, the cheaper they can sell it - not a whole lot different to any other industry. That's not to say they don't attempt to have sophisticated pricing models that ingest all kinds of underwriting data points, but there are costs to that complexity too.

There is a broad market in specialist insurance which caters to the non-volume cases. It just costs more because you have to expend more effort-per-sale (and of course because non-volume also tends to mean that the risks genuinely are higher - e.g. homeowners with prior subsidence claims).

Given how easy it would be to data mine this out of the claim history I find this explanation hard to buy. There must be a whole set of specific claim types that show no correlation with future claims. If you can’t find these in your data you are not looking very hard.

Of course if no one else is looking why give up the easy money - after all it is not like the customer can buy a new policy without the massive markup. Collusion does not need to be explicit, it can be accomplished just through everyone using the same systems and rules.

Properly rating a potential customer seems to me like the key metric for these companies and if I can find a way to better qualify risk and therefore offer lower prices to truly less risky customers that equals profit. So I'm pretty sure there is very strong competition in this area and insurance companies will do absolutely everything they can to ascertain the risk of each individual customer and price a policy accordingly.

You would think so, but if it is being done on a blanket basis then it would suggest that not too much looking into the individual situation is being done.

Competition only works if at least one of the parties involved is trying to compete. If all the insurance companies are happy to slap on a blanket risk premium then there is no competition. This is great if you want to disrupt the status quo.

"In your friend's case, the fact that she had two claims adjusted her relative risk profile"

For car insurance it makes sense, as the risk is specific to the driver, so the number of claims tells you something about the insured's driving.

But, for home insurance, isn't it mainly about the property rather than the individual? And isn't that mostly about location and property type?

Will this continue to affect her premiums if she moves? Will it also affect the new owner of her home, even though they weren't party to the previous claims?

> For car insurance it makes sense, as the risk is specific to the driver, so the number of claims tells you something about the insured's driving.

Not necessarily. One of my friends had his parked car hit by a drunk driver while he was not in it. His insurance premiums still went up after claiming for the damage.

Even in that situation there's an element of avoidable "own risk" that could be priced into the premiums. Someone whose parked car gets hit by a drunk driver is more likely to:

- Not park their car in a garage overnight, exposing them to various damage to the car.

- Not park their car in a garage when they go downtown.

- Park their car near bars or other places statistically more likely to have drunk drivers around.

I'm not saying your friend did any of that and that it wasn't a complete freak accident, but on the scale of everyone that's being insured there's surely correlations like that that justify the premiums going up.

You forgot a bullet point

- not buy a house that's next door to a homeowner who rents the home to a person who is willing to drink and drive.

In case you didn't pick up on it, I'm calling your bullet points bullshit.

It's kind of like arguing over code, there's always going to be something you can nitpick as not optimal. There will always be something a person could possibly have done to prevent the issue (like committing suicide that morning), but it's a question of what's reasonable, and it is not unreasonable to expect a vehicle parked correctly in a parking spot to not be hit by another vehicle.

The topic of discussion is not what's reasonable activity. Of course it's reasonable to legally park your car outside, it's also reasonable to go rock climbing.

We're talking about insurance. There's certain reasonable activity that exposes you to heightened risk. Your car is at higher risk parked outside than in a garage.

Who should assume the cost of that heightened risk? Should the insurance company charge a person with a garage and a person without one the same premiums? Should there be no consequences for damage that could have been avoided by storing your car in a garage?

If the answer to those questions is "yes" you've created a moral hazard. Why would anyone store their car in a safer location if their insurance company will pay for any damages without their premiums going up?

To categorically say that this shouldn't be priced into insurance is to say that some buyers of insurance with higher risk profiles should be subsidized by those with lower risk profiles.

Now of course insurance companies are far from perfect. They have limited data to work with and it wouldn't be cost effective to figure out whether some individual customer had a one-off freak accident or not.

But over their entire customer base it's not an unreasonable approximation to connect your premiums to traffic incidents you were involved in, even though you were not at fault.

Not being at fault is not the same thing as not having exposed yourself to heightened risk. The police deals with the former, insurance companies deal with the latter.

> Not being at fault is not the same thing as not having exposed yourself to heightened risk.

By moving in next door to a drunk, how dare you.

The problem with your example, and the reason it doesn't apply to this particular discussion, is the rates will go up if a drunk drives into your garage door and hits your vehicle.

Is it because of a heightened risk, or is it because the insurance company removes you from their special "never had to pay anything out on you" list?

someone who gets a DUI is at an increased risk for wrecks, this is reasonable. Someone who is parked in a parking spot is not, that is not reasonable. The driver is already paying a rate based upon where they live, they have ALREADY paid for that risk.

> One of my friends had his parked car hit by a drunk driver while he was not in it. His insurance premiums still went up after claiming for the damage.

What the heck? Can you elaborate on this? How is this even legal?

Very simple. If he knew who caused the damage, then that person and their insurance would have paid for it. His premiums wouldn't go up by a bit. But if you got hit by a drunk driver, and they disappeared, then you are using your own insurance to fix your car - so of course your premiums will go up. That's exactly why, if someone damages your car while you are driving it(breaks off the mirror, scratches the side, breaks the fender), at least try to write down the registration number of the other car if you can. Otherwise the damages will be coming out of your insurance, not theirs :P

So if they're adjusting premiums such that they're net positive on every single account, does that mean they'll refund your money if you end the contract without ever having made a claim?

> So if they're adjusting premiums such that they're net positive on every single account, does that mean they'll refund your money if you end the contract without ever having made a claim?

No, because you're paying for the peace of mind that comes with knowing that your worst-case scenario has been mitigated, on the off-chance it happens. Even if there is no disaster, you still benefited from not having to worry about it as much (knowing that the insurer would cover some portion of it).

Let's play a game: you're allowed to flip a coin ten times, and I will pay you $1 for each time it comes up heads[0]. Your expected value is $5, but you could make as much as $10 or as little as $0.

Someone else comes up to you and offers to pay you a guaranteed minimum of $2 at the end of the game. In exchange, you have to pay him $.25 every time you flip the coin, regardless of whether it comes up heads or tails.

In expectation, you're going to come out behind, but this game tightens the variance on your outcome. The worst case is that you lose $.50 (you pay the insurer ten quarters, flip ten tails, and receive $2 from the insurer). The best case is that you receive $7.50 (you pay the insurer ten quarters, flip ten heads, and receive $10 from me). The expected outcome is lower, but the range of possible outcomes is $8, not $10.

In the real world, you're insuring against money being taken from you, but mathematically it's the same, and I find it's easier to explain it this way. Most people have a more intuitive sense of earning money than losing it. Go figure - psychology is weird.

[0] One notable difference here is that the distribution of coin flips is approximately normal (binomial), whereas most insured events have a very long tail, with a mode of 0.

Insurance rates usually go up after a claim even if it's obvious that the claim doesn't reflect a higher future risk, though.

In a way they go up because they can. If you look at it from their point of view. It is an event which they can point to and justify and say "sorry, this is our policy" and just raise the rates.

Now of course if they charge too high, then you could go to a competitor. But there is this CLUE database (I just learned about in a sibling comment here) which apparently is shared among insurers and depending on what is there (or what is not there! -- such as, it was really just an accident) you get labeled and dropped. So even a competitor might decide it is safe to stay away from you.

It does, you have clearly shown yourself to be unlucky!

> No, because you're paying for the peace of mind that comes with knowing that your worst-case scenario has been mitigated, on the off-chance it happens.

The irony is that the peace of mind I end up with when dealing with insurance companies of any sort is the dead certainty that they are going to screw me over just as hard as they possibly can, should I ever actually need the service they pretend to be in the business of selling, so I'd better give them as little as I can legally get away with and expect to handle the unlikely disaster on my own.

I understand how insurance works, but you haven't really addressed what I'm talking about, which is that insurance companies often don't seem to understand how insurance works. You can't expect to make a profit off of every account - it defeats the purpose of an insurance scheme altogether. If an insurance company raises the premiums on a person after they make a claim, or drops them from coverage, even when the nature of that claim does not raise their risk profile, then they're doing it wrong.

I would think Insurance companies understand their business better than most industries < you loose a lot of money fast if you do risk wrong.

They don't expect profit from all their accounts, not a priori. However they choose to do business only with those account which they believe will be profitable. If They expect to loose money from an account, they'll choose not to do business with you.

We can debate if this is moral or not (some religions state it's not, i.e. the Amish as it is a form of gambling and discourages charity) but that's the game.

You're right. The parent comment is explaining only the actuarial risk model of insurance schemes, which is not the same as raising rates on a customer for makng a claim, even when his/her risk profile is unchanged.

The purpose is clearly to discourage you from making a claim, which is what makes insurance a legal scam.

I hate to agree because what the insurance company did is nasty. But you're right.

Which is why I'm skeptical of the AMA requirements to cover certain recurrent health services (annual checkups, contraception). If they're unavoidable than its not insurance!

One correction: it is the ACA ("Affordable Care Act") not the AMA. The AMA is the lobbying organization for providers.

Also, most health insurance plans have always covered checkups, contraception etc. The ACA specifies that these should be covered without copayments and deductibles. This is intended to be an incentive for the insured to get these kinds of preventative procedures instead of waiting till more costly problems develop. This tends to reduce the total cost of care to be reimbursed and (in theory) should lower premiums.

Lol. I was going to call it Obamacare, but I thought it would be needlessly divisive.

Its about the total cost accounting. Many types of insurance offer discounted, or even free services for things that lower your total risk. You get a break on home insurance for having an alarm system. Car insurance will replace the windshield for free if it is chipped. It is cheaper for them in the long run to replace the glass and have people driving with an unobstructed view. Yearly checkups for some insurance plans will actually pay you to go.

Sure, and the same things can be said about contraception. On the other hand an insurance company could argue that since you didn't avoid getting sick/pregnant by going to the check up they're not going to cover it.

Which is an absurd way of thinking about it, but there you are.

So that is why repairing glass damage is basically free under my policy - didn't seem to make much sense to me.

Re [1]: From a probability perspective, wouldn't it be better for the insurer to get a new customer right after an event? P(cat|cat) must be much smaller than P(cat)?

Insurance isn't a scam, but market forces have caused what you describe.

If the insurer offers an "even" price to all people regardless of history, then it will lose business to a company that offers "No claims discounts". Therefore all of it's customers would he high risk driving prices up even further.

Essentially unless you are willing to outlaw all risk assessment and premium scaling you cannot prevent exactly what you describe. Note that the EU did this with regards to gender discrimination on car insurance premiums (insurers have simply found proxy variables which correlate highly to gender).

How do I access my CLUE report?

My house insurance company recently sent me their updated privacy notice and I'll have to reread it. I don't remember them saying they would share my claim history with third parties.

Wonder how they share this information. Is it a private database service they are all subscribed to?

I just edited my comment to add that. It's called a CLUE report. Every claim you make goes into your report and it's shared amongst all insurers.


Thanks. This explains a lot of things I heard related to claims that I have wondered about in the past.

Insurances can be done fairly though. Take car insurance (where I live); if you drive accident-free, no problem, you get a discount that grows every year (up to 70%, depending on the company). Get into an accident that wasn't your fault? No problem, the other party's insurance (which is mandatory) will pay. Get into an accident that was your fault (like I did :( ), your no-claim discount will drop because you f'd up.

My insurance doubled. This was a €900 bill though, so doing the maths, that's 9 years worth of no-claim discount (as in, I'd have to drive accident-free for 9 years with the same policy before I would earn the not-claiming-insurance back).

Of course, that's based on a motorcycle insurance, which is half as expensive as a car insurance; if I get a car insurance later, that discount (or lack thereof) will persist.

TL;DR: I have no problems with insurances becoming more expensive for people that make or get claims for things that were their fault.

You don't need insurance or a burglary, you need insurance for a disaster that is unlikely to ever happen such as the building burning down. And having a mindset like this means you can get insurance cheaper by having exclusions and a high excess.

Insurance has got to be the best business to be in. In what other industry is the business model "take people's money and don't do shit"? Plus, in a lot of domains people are required, by law, to get insurance.

It's great.

>> "Plus, in a lot of domains people are required, by law, to get insurance."

It's almost like the insurance industry is large, wealthy, and politically well-connected enough to capture regulatory bodies in order to insure the existence of markets for its produc... wait a second...

take people's money and don't do shit

That's not what they do, though. They are in business to make money, yes -- but they don't always. A bad hurricane season and they can (and do) lose billions.

Yeah, it costs a lot to hire inspectors to go out to every property and determine that it was the water in the air, not the wind itself that destroyed the house so they aren't covered.

Cynical and false.


Katrina: $47.6 billion paid out. Andrew: $25.0 billion paid out. Ike: $13.1 billion paid out. (Constant 2011 dollars.)

See discussion of "wind pool" in the document, by the way: the way Florida works is by having a semi-governmental organization insure wind damage and letting private insurance companies sell "we'll insure any risk as long as it isn't wind damage" policies.

The requirement by law is fair. If you drive your car into someone else's, you or your insurance company should pay for the damage - the case where the victim gets nothing is thereby avoided.

In theory anyway.

In New Zealand there is no mandatory car insurance, and that's how I think it should be.

(I do not live in New Zealand).

Take your own risks in life. Don't drive a car you can't afford to replace.

Mandatory insurance is for the injury and property damage you cause, not that you incur.

Yes but any damage that is caused by one party is also incurred by another party.

In the "no mandatory insurance" scenario, you're taking the risk that someone else may damage your car. So don't buy a car you can't afford to replace.

It's complicated in the US because the person at fault is also on the hook for medical costs of any injured parties. The car insurance you get is mostly about taking care of that, not the property damage.

FWIW I didn't downvote you. Your post is borne of ignorance of how it works in the US, which is actually enviable because it means your healthcare system isn't an absolute wreck :-)

When one of my upstairs toilets started leaking in my house in the US, it finally got so bad that I noticed a stain on the garage ceiling. The insurance inspector said that insurance would not cover a "slow leak". I was very nice and polite and pointed out how soaked the subfloor was and that there was no way to know when the leak started (which was true). She wrote her recommendation that it be covered, which the company apparently accepted since they wrote me a check.

Definitely not $50k (more like $2.5k), but it's still disturbing that the line between insurance covering it and not covering it was so thin.

I wonder if a more thorough inspection would have caught it. Surely houses built around that time are routinely inspected for asbestos, lead-based paint, etc before purchase anyway. (Actually, going back and reading the comments, he actually addresses this point: http://www.jefftk.com/p/mercury-spill#fb-752340840802_752343.... Perhaps he could have made it a condition of purchase, that the seller pay for a mercury vapor inspection? Perhaps it's not such a common problem that such a requirement would be reasonable. Hindsight, etc.)

Yap. An insurance inspector if they are nice enough, will let you know between the lines how you need to phrase your claim. Forgot what the trick word was when we had a leak at our house, but it was similar phrasing -- "So let me remind you, if it is <this>, we'll cover it. If it is <that> we won't. So... which one is it". -- "Oh ok, definetely <this> then ...". /smile

It's kind of scary that something of this magnitude would depend on the kindness of the claims inspector. The one I dealt with was professional yet friendly and helpful (and climbed my wooden stepladder while wearing heels without a second thought). If she had been having a bad day, or just generally of grumpy disposition, or whatever, things could easily have gone the other way.

No matter how much our institutions, laws, and social customs try to hide it, when we interact with each other we absolutely depend on mutual trust and cooperation. It's easy to take it for granted because in the vast majority of our interactions we are nice to each other, or the stakes are too low to be mean. The power we hold over each other is always there, though, in every interaction.

It's not just the kindness of whichever inspector comes to your door. I imagine a majority of it is the company- it's goals, culture, etc. There are insurance companies that will try to deny you a claim that obviously should be covered, and there are others that will cover your claim even though you made a poor decision choosing coverage levels that were too low.

It allows for a great deal of discrimination, both explicit where the inspector deliberately chooses to not help and implicit where the inspector isn't even aware they are discriminating.

Reminds of Mr. Incredible's day job as an insurance salesman who helped the nice old lady by telling her how to work the insurance system.

I've had (I think) a somewhat similar experience. My water line into my house broke outside and had to be replaced. When I called my insurance company, the adjuster made it clear that the costs "to find the exact source of the leak" would be covered but pipe replacement would not be. So I obviously still had to cover part of the job but was able to get the bill itemized in a way that insurance still paid a reasonable portion.

For serious claims, it's better to hire a public adjuster.

Thanks for the advice. I was not aware this was an option.

I'll throw my hat in the ring. Recently had a car totaled when getting it shipped cross country. Apparently because it was an "Act of god" (a hailstorm, with what looks like fist-sized-rock-hail in that every piece of glass and most trim on the car had holes in it, although I'd argue the insurance was for the idiot driver who didn't pull over or cover his load.) the insurance company refused to do squat. The car was only blue booked at 5k at the time, but we had to replace it with a 25k car, so I count that as a decent amount of loss.

To bring this back to topic, I would gladly get on board with any plan to fix "insurance". It really feels like less insurance and more government mandated protection money ; but that seems to be the fundamental problem, that reforming insurance is almost paramount to reforming finance. How do you even begin to make headway against an entity with that much power/influence and tentacles already so deep in these processes?

(edit re: protection money; the gist of it is anger that if you fall on a "responsible/lucky" part of the bell curve, you'll likely end up paying out for FAR more than you ever get back while simultaneously watching the insurance company often do everything in their power to NOT come through when they should. In my case, I would have expected the transportation company's mandatory liability insurance to cover this.)

Insurance companies cannot credibly cover acts of god, aka correlated risks, because they happen to too many people all at once. It's not a simple matter of "fixing" insurance for those matters.

NPR's Planet Money had a good discussion: http://www.npr.org/sections/money/2014/10/03/353030214/bedbu...

We're talking about hail. Insurance companies cover hail damage all the time.

(Actually, hail claims have been going up: http://www.claimsjournal.com/news/national/2014/05/02/248354... )

The entire reason we buy insurance is to cover events like that, that one would be unable to cover personally.

Of course they can cover. It's a matter of how much you pay for your insurance, and to a large degree how much they company saves up. In the case of a hailstorm it's not because they cannot pay, it's because they don't have proper savings to cover it. A hailstorm with fist size hails is not going to cover the entirety of California, so it's very manageable.

An example, when a fireworks factory in Denmark exploded the total claim of material damage was 750 million DKK (113 million USD). The vast majority was covered by insurance companies, even though that would fall under correlated risks. One of the way insurance companies handle this is to have a joint fund with other insurance companies (I think this is government mandated), where they can withdraw in cases like this.

This joint fund is called reinsurance- essentially insurance for insurance companies.

Someone drove his car into a hailstorm unprotected. That's not an act of god.

If you're in the middle of Kansas and a big hailstorm comes up there isn't much you can do. There's nowhere to hide.

Kansas has trees and overpasses; it's not completely barren. I just drove through a ridiculous rain storm in Kansas two months ago and had to do exactly this.

If you're driving cross-country you're on an interstate. Park under an overpass.

And get hit from behind? No, thanks.

Interstates generally have a decent width shoulder to pull over on.

Also, it's not safe to drive during a massive hailstorm. You should be pulled over anyway.

We're talking about a car-hauler. You could run into it from behind with a loaded dump truck and do no damage (to the car-hauler).

> It really feels like less insurance and more government mandated protection money;

Car insurance is different from other forms of insurance. The reason car insurance is mandatory is because otherwise, if you hit someone or damage their property with your car and they successfully sue you, they could very well end up with nothing (if you're broke). With insurance, that person is guaranteed to get a payout, because the insurance company is well-capitalized enough to be certain to pay out.

In a world in which everyone drives, this is mathematically equivalent to everyone purchasing insurance against damage that happens to them or their car by someone else. The reason it's not structured this way is because (1) not everyone drives a car, and (2) it creates a moral hazard problem (having car insurance - and the consequences to taking actions which can raise your premiums - serve as a deterrent to bad driving.)

Only liability insurance is mandatory, and that would never cover your hail-damaged car, so this seems like a specious argument. You're not required to have collision and comprehensive coverage if you don't feel it's worth it.

I think that is exactly his point. The government doesn't make you get insurance that would cover hail damage to your car. It only makes you get insurance that will cover you when someone sues you for injuring them and damaging their property.

Basically Car Insurance isn't to protect you. It's to protect other people from you. Which is why someone can get in an accident while driving drunk and their insurance company has to pay.

We went through a very similar experience when our car was being transported half way across the country. They driver somehow managed to roll his trailer on a freeway curve (his claim was high winds). His insurance company tried to claim act of god because "the wind did it".

I'm still trying to figure out how the wind pushes over an open trailer with 2 sports cars on it. At least mine was 4 or 5 years old at the time, the other car on there was brand new and had only been driven far enough to get it on and off the trailer.

Wow this thread has confirmed what I always suspected: shipping a car is a bad idea. I have actually pulled a car behind a U-haul through multiple states, but that was me, and I know how to pull trailers. A friend of mine in Hawaii was all set to ship his car from the mainland until I pointed out how little sense the math made.

Anecdotes on the Internet do not actually confirm much.

It's perfectly safe and low risk if the vehicle is secured In a cargo container.

Did your insurance company also not cover it?

I'd always, perhaps naively, assumed an "act of god" was simply covered.

> The car was only blue booked at 5k at the time, but we had to replace it with a 25k car, so I count that as a decent amount of loss.

That's twisted logic. There was a loss of perhaps somewhat more than $5k all things considered, but you didn't have to replace a $5k blue-book-value car with a $25k car. That $25k may have been a big outlay if you paid cash, but it's not a loss for that amount. So far, you've only lost $25k-(current bluebook value), which is much less than $25k (as long as the car hasn't been damaged) even if the car was new and dropped a thousand or two the moment you bought it.

I think you might have been misunderstanding my statement, as I would agree that the loss ranges between 5-10k (not far from your estimate.) To me it's a sum of 2 things: Loss of a 5k car + loss of opportunity/investment returns of 25k over at least 5 years. Don't mean to compare to OP's 50k repair bill, but even 5k-10k for someone else's negligence hurts when insurance somehow dodges the bullet.

> Loss of a 5k car + loss of opportunity/investment returns of 25k over at least 5 years

This, but minus the value of the car you now have.

Wouldn't you in this case claim the money from the transporter and they would hopefully be covered by their insurance?

I tried, but they started playing hardball, saying that if I didn't take the car from them (which they wouldn't allow me to do without signing a contract saying that I accept it "as is" and promise not to follow up) they would start accruing charges for storing it. I had just moved into the area for a job starting simultaneously, so unfortunately I didn't have the free time or resources to maneuver against them (The closest thing I got to legal advice amounted to, verbatim, "They have you over a barrel"). The whole situation seemed really sketchy.

Would reporting them for theft work? Tell them they have X time to give you your car back or you will report them for theft.

In that case it should be the shipping company's problem - they were responsible for it, they get to pay for it. If their insurance policy doesn't pay for it for whatever reason, that's not your problem.

Why would your insurance cover negligence of someone transporting your car? Ask for them to pay for the repairs, or sue them if they refuse.

Yep, an alternative model enabled by technology is mutual / cooperative insurance in which the policyholders not only own the company but also govern the release of funds. This way incentives are aligned - the insured want the insurance to act fairly, even with respect to others, so that it will be there for them. It would be something like gofundme but on a subscription basis, with up or down decision-making by subscribers.


> Yep, an alternative model enabled by technology is mutual / cooperative insurance in which the policyholders not only own the company but also govern the release of funds. This way incentives are aligned - the insured want the insurance to act fairly, even with respect to others

That doesn't really align incentives, though. There's really no benefit to each individual to approving another person's claim (all it means is less money in the pot).

Claims are rare enough that it's not enough to simply say 'if you vote this way for someone else, we'll apply the policy consistently for you', since the expected number of claims that a person is likely to file over the course of their plan is close to zero.

(And even if it weren't, the whole issue is that insurance has relatively well-written rules for clear-cut cases, but the complaints people have - like this one - are generally about the interpretation of those policies for special cases, since policies can't possibly enumerate every possible outcome.)

Vanguard would be a good model to look towards.

I'm pretty happy with my (mutual) auto coverage.

In fact, right now I'm getting around on a rental car courtesy of my policy, while my car is being repaired; I'll be out of pocket about $250 total for around $2000 worth of damage to the car (tl;dr -- driving home a few nights back, didn't see a traffic cone that had rolled out into my lane and ran over it at 50mph, which is not good for some of the things on the underside of the car).

You sure they won't claw back that claim in the form of raised premiums?

Doesn't that make sense? Insurance is to cover immediate problems, but the risk given the driver increases with each claim (I'm assuming, that just makes sense to me). So, premiums should reflect this.

No, it doesn't. Because I don't get insurance coverage for a nominal fee like $1 per month. I pay a non-trivial amount of money every month. So in my mind, 90% of that is going towards the possibility that I'll eventually make a rare claim (float), 5% is going towards administration, and 5% is profit.

I know those numbers aren't right, but lets say that they are. In that case, paying $100/mo for insurance and not making a claim for 10 years there's over $10,000 worth of loose money (more once you factor in interest!) sitting around that's just for me because according to your analysis insurance isn't risk pooling but risk smoothing. So then I make a claim for the whole car, $20k. Fine, half of that comes out of the money I already paid to them for risk smoothing, the other half should come from the future payments I'll make to them for risk smoothing. My rates should double in this case.

But most people don't total their cars every 10 years, many people go their whole lives without ever making a claim. So at the end, they might have paid $50k in self-insurance risk smoothing premiums that the company gets to just keep, that's not right is it? Clearly no.

So what people actually think is supposed to happen is that everyone pays about the same amount and some people get unlucky and make claims and that doesn't get counted against them. They're all wrong, but that's how insurance is sold so it's understandable.

In reality I suspect that the breakdown of float, administration and profit is more like 30%, 30% and 40% which is why premiums can go up so much after you make a claim; you're actually making almost no real contribution towards the float at "regular risk" insurance rates. Of course this also neglects the risk pooling aspect.

Weaseling out of paying is their primary job, yes.

("Companies are legally obliged to maximise shareholder value" isn't exactly true, but it's usually what people cite when a business is doing something awful)

Last year I was travelling around Italy and somebody broke into the rental car I was using (a Smart Fortwo) and stole my luggage - which contained my camera, laptop and passport :D Although I had travel insurance and separate car rental insurance, neither covered theft of personal possessions from an unattended vehicle.

Even the 'super everything included' insurance rental companies try to sell wouldn't have covered this, as they exclude items accessible from the passenger compartment (like most small cars, the Smart Fortwo doesn't have a separate boot).

If you are interesting about innovation in insurance this post is a good startpoint : https://medium.com/@robmoff/disrupting-insurance-4cf61fb8c55...

There is little insurance startup compared to fintech but 'insurtech' is a really promising field with old incumbent and a lot of opportunities.

The more coverage the policy provides, the higher the premium will need to be.

Given the discussion in the comments here of avoiding the cleanup, perhaps something similar to Superfund would be a good idea (there is some clear general benefit to cleaning up the house).

> How many times has it happened that insurance companies weasel out of paying?

That's the business model for insurance companies. They try to make you think that you're covered when in reality you're not.

I support their refusal to pay in this case. Its impossible for a policy to cover events that happened in the past. A policy covers an individual against specific events that may occur for a fixed duration based on how much they pay. The house was already damaged, likely decades ago. The house was inspected by a licensed home inspector before sale. Due diligence was attempted. Insurance isn't a product that allows you to buy damaged goods and have them repaired. It allows you to preserve the utility and value of existing goods.

I do understand why insurance companies don't want to pay for things that happened before the policy took effect. Otherwise people could do harmful things, take out a policy, and then file a claim. All sorts of bad incentives.

On the other hand, it's pretty frustrating in our case!

Wouldn't an insurance company that was TOO good at paying out go out of business? :)

That's arguably overkill for domestic contamination by elemental and inorganic mercury. Even that family in that contaminated house was probably at far greater risk from methylmercury[0] in predatory fish. So cutting predatory fish from the diet would have arguably been more cost effective. But it's hard to say. CDC[1] is more nuanced on the topic than EPA[2]. And I do tend to trust CDC.

[0] http://toxics.usgs.gov/definitions/methylmercury.html

[1] http://www.cdc.gov/biomonitoring/pdf/Mercury_FactSheet.pdf

[2] http://www3.epa.gov/airtoxics/hlthef/mercury.html

They have a 1.5 year-old that undoubtably puts everything in his/her mouth.

Even the CDC factsheet says the impact of low levels of exposure is unknown. And we're not talking about the milligrams in a CFL bulb, a speck of mercury. This was cups of mercury.

Impact unknown! Meanwhile many American dentists install mercury amalgam (about 50% Hg) in tooth cavities inches from the brain where it will sit for years on end. How can anyone support this with a straight face. The response is something like 'yes,we know mercury is a devastating neurotoxin but it's tightly bound in the amalgam and there is no proven statistical relationship to say it's dangerous'.

Haven't amalgam fillings been phased out yet? At least in the Netherlands most dentists now use composites to fill cavities.

Wikipedia seems to suggest that the performance of those is comparable to amalgam: https://en.wikipedia.org/wiki/Dental_composite

Cost also seems to be comparable, where composites may even be cheaper than amalgam, because of all the environmental issues surrounding the amalgam material.

In Poland you only get composite if you pay extra, National Health Fund (mandatory insurance) gives you the amalgam. And a month of waiting, where time is crucial. And no anastheatics for drilling. SLAVIC FUN!

Yeah, I believe it's the same in the UK. I don't think the month of waiting is too bad, cavities take a long time to develop. A checkup every 6 months should be enough to prevent them from developing too far.

In my experience NHS dentists in the UK will give you composites if the filling is in a visible area. Also, they do provide anaesthetic!

I think it depends on the dentist. Mine uses amalgam--of which I already have lots (unfloridated water growing up, among other things probably). On the other hand, a friend of mine told me recently that her dentist wouldn't use an amalgam filling in spite of admitting that the composite wouldn't last as long. This is in US.

I pay for private treatment in the UK and recently had a new amalgam in a non-viewable area because I was told it was far better for the situation and would last longer. Otherwise I always have composites.

When I was a teenager, I accidentally swallowed a damaged mercury filling. Luckily I still seem to be alright :-)

You can drink mercury and nothing bad will happen. It is the vapors that hurt you. A lot.

A toddler breathing mercury vapors is bad idea. Of course bucket of sulfur will go a long way towards cleaning this up.

I was thinking 'drop yellow sulfur over the floor' as I read the first paragraph and when the fire officers arrived. As I read the rest of the article and found the section that describes the source and progress of the spill, I realised that a more radical cleanup would be needed.

I'm in my late 50s and we used to use mercury liberally at school and after. I'm talking half a gallon of the stuff to demostrate the Toricelli vacuum, and later at University for floating bearings. Always dirty on surface, so low vapour. Bucket of sulfur in the lab. I'm not recommending a return to those days (benzene, carbon-tet, acetone on tap &c).

I do get that. Still, what I get from the article is that the owners were manipulated into throwing far too much money at the problem. We could have much the same discussion about asbestos, lead paint, etc. One key issue is removal vs encapsulation.

I wonder how this kind of thing plays out for people that don't have anywhere near $50k available. I'm assuming since the company worked first and then invoiced, that the options would be either (1) sell the house and use the proceeds (assuming equity exists) to pay off the cleaning, or (2) declare bankruptcy.

If the company were to require pre-payment for cleaning, then it's really just down to either (1) abandon and have the bank seize the house, or (2) sell the house for pennies on the dollar to an investor.

Things like this (well, not this exotic, but like a busted sewer line which could cost $20k to replace) used to keep me up at night after we "bought" a house. I've found I can rest by mentally reframing the mortgage as rent and knowing that an "out" (strategic default) is always there if something goes very expensively wrong.

You're forgetting (3): get the shopvac, vacuum it all up, and then dump it in the back yard.

And yes, I know people that would do exactly that.

Seriously, NO!! If anyone ever reads this do NOT use a shopvac. You will make the problem 10000x worse. Mercury is only an acute health hazard if vaporized. A shopvac will instantly vaporize it. You will turn an expensive and irritating headache into a medical and possibly life-threatening emergency.

Unfortunately in this case they ended up having to demolish a floor and ceiling to find all the mercury that had soaked through the floor; a shopvac won't do that.

A shopvac (or any vacuum not designed for mercury) would be a really bad idea: they vaporize the mercury and seriously distribute it around the house.

I agree with you both, but that doesn't change that I suspect this would be the default approach for a lot of people that have neither the money nor the ideology to justify a professional cleanup.

An easy example of this kind of thinking is that people used to (and many still do) bury used motor oil in their yard. (See e.g. http://www.experienceproject.com/question-answer/How-Can-I-D...)

There are alot of dangerous polutants out there, and around the home, but run-of-the-mill motor oil is not really one of them.


(3) clean it up with a dustpan :-D

Seriously, mercury is not dangerous unless inhaled or ingested. Suit up with a cheap hazmat and gloves and clean away...

Yeha, I'm a bit dumbfounded about the calling of the fire dept, the reaction and so on. I would have just figured out where it was coming from and cleaned it up myself with some gloves and a dustpan.

> Yeha, I'm a bit dumbfounded about the calling of the fire dept, the reaction and so on. I would have just figured out where it was coming from and cleaned it up myself with some gloves and a dustpan.

This is probably why you don't clean up mercury for a living. You don't know the complications until you're taught them.

And if you miss any, your young daughter is going to find it. Seriously isn't something you want to mess with.

This happened to me when I was about 9, when I didn't know what mercury was. There was a few droplets on the floor and I ended up poking it with my index finger for a few minutes. To this day I don't know what the medical effects were.

Unless you licked your finger afterwards, nothing.

Even if you lick your finger, if it is elemental mercury then probably nothing either. But don't try it!

Just curious: what would it need to be for it to do something? Not that I'm planning to...

Atomized somehow so that it would be inhaled.

This is all I'd do. Shit inside walls is likely never going to be disturbed, so a face mask + gloves + dustpan and brush would get me through cleaning up the spill.

But then again, I have a generally lax regard for life and limb. The way I figure it, my drinking, obesity and other vices probably erode my life expectancy more than a single controlled exposure to mercury.

Well, that's the wrong logic. Exposure to mercury is bad and your other health problems will compound this. (Comorbidity).

I would imagine it's the verification and figuring out where it is that's a hard problem. How would you reassure yourself you got it all, especially if it seeped through the floor?

Buy a meter designed to detect any mercury vapor. I'm sure it's pricy, but it's less than $50K.

How normal (not wealthy and/or Californian) Americans deal with mercury in their home:

1) Ignore it, or sweep it into a dustpan and throw it out if it really bothers them.

2) Enjoy not having a $50,000 bill.

3) Almost certainly live into their 80s anyway.

I had a physics class in a community college that had us handling open containers of mercury for our experiments. It was maybe 15 years ago.

Someone in one of the classes managed to knock one of the jars over, and mercury spilled everywhere on the floor. Either the students hid their spill from the staff, or the staff just had some janitors do a simple sweeping of it, because I noticed spheres of mercury everywhere in that classroom throughout the semester.

I didn't realize that mercury spills are such a huge issue until recently.

The professor also seemed to be going crazy, which suggests to me that this happened more than once in the past and he was suffering from the effects of mercury poisoning.

> I didn't realize that mercury spills are such a huge issue until recently.

As the post mentions, the world at large didn't realize that vapors from mercury spills are toxic until recently.

Um, someone (not saying I) may or may not have played with mercury from a broken thermometer as a child. Is that person (not necessarily I) a walking health hazard? How does this work?

Short term exposure isn't much of an issue, unless you inhale or ingest it. (Simply playing with it isn't going to send out massive amounts of vapor; it's not super volatile.) The real fear is that it seeps into a hard to clean place and provides a steady stream of vapor over a long time.... basically what the OP illustrated about his house.

Previous generations had no qualms playing with it or lighting it on fire in science class. While it might not have been super healthy, we also don't have a generation of mad hatters.

It's the kind of thing that would probably only become symptomatic after years of living in an environment with persistently raised mercury levels in the air, like the OP's house.

Ah, makes sense. I guess that someone (not necessarily I) is in the clear as it was not a prolonged exposure. However, since that someone (not necessarily me) may or may not have disposed off the drops of mercury improperly, I wonder how often people disposed off of mercury properly in the past.

There is some awareness about asbestos but probably not mercury. It'd suck to buy a house and a month later discover a puddle of mercury in the attic.

It accumulates in the body (since it takes decades to go back out), so one-time small exposure is not so bad. Long-term exposure or a very high exposure (like drinking some) on the other hand...

I think this mercury scare is overrated. I have played with thermometer mercury many times as a child. I used to break thermometer to get the mercury out and play with it as it was very interesting liquid! Am still well and alive after 20-25 years.

Alive? Yes. Sane? Arguable, :p

No, mercury vapors have been documented as toxic for centuries. It was noticed that sailors on ships that transported large amounts of open mercury would get sick from the vapors.

It's also the fact that elemental mercury's toxic side effects are really hard to quantify and see because it fucks up the central nervous system, and is of more psychological detriment. Note that this is elemental mercury, not methylmercury, which only happens from predatory bio-accumulation in fish.

Over the years OSHA has consistently been lowering their safe mercury exposure levels (blood tests), and it's fast approaching "No mercury exposure at all is best."

I used to work in a lab with a ton of mercury in it, and some lab workers who were quite liberal with their handling of mercury, and liberal over 20 years. I don't know if they were crazy from the start, but I didn't want to find out.

Agreed, except that methylmercury and other similar organic compounds do occur in the world in places other than carnivorous fish, and sometimes people do get exposed to them in those other places.

"The professor also seemed to be going crazy..."

Mad as a hatter? (https://en.wikipedia.org/wiki/Mad_as_a_hatter)

They're not - it takes quite a bit of temperature to vaporize (unless nebulized via vacuum cleaner or something) and you gotta be an idiot to eat it... Just clean it up carefully...

I remember playing with mercury when I was a kid, rolling it around in my hands, etc. Luckily it was only on one occasion, not something you'd want to make a habit of I guess.

Yep, was alway a treat when a thermometer broke, you'd get to play with the Mercury. Coating copper pennies with it was especially fun! Little did we know.

So people would use a mercury seal to put pressure on the water, allowing the system to run hotter without boiling.

I didn't quite follow this part. Where in the system does the mercury go, how does it add pressure, and does it have anything to do with Wikipedia's description of using mercury in glass-to-metal seals?


This page describes that system, I think:


(the "Honeywell Heat Generator")

I've now linked that from the article; thanks!

(I read that page when I was first reading about this the night of the spill, but had forgotten about it. Holohan is amazingly knowledgeable about old heating systems.)

Did your home inspector note the upfeed system in the pre-purchase report? Did you sign a waiver limiting the inspector's liability?

Just reread the inspection report; they didn't notice it.

Wow. If there’s anyone deserving the title of a hacker, it’s the author of this page.

It's a pressure valve. Here's the patent:


I don't think I've a clear enough understanding of how it works to try to explain it.

It's essentially a pressure regulator I think.

Here's an EPA document which shows some pictures, look at page 2 for the unit the OP has.


A friend of mine has a "mercury blob maze" [1] where you have a little blob of mercury trapped in a plastic container and you have to get it through the maze - it was fun to use at different temperatures, as the blob would want to break apart when hot, or not move at all when cold. Shaking it turns it into 300 blobs.

Upon seeing it, my science teacher dad had some cool stories about playing with Mercury 20-30 years ago in high school classes. They used to take it out and handle it, no big deal :)

[1] Like these https://www.google.com/search?q=mercury+blob+maze&source=lnm...

Elemental Mercury isn't especially dangerous though. People freak out over the word "Mercury" but forms like that aren't bioavailable for the most part and are reasonably safe. I wouldn't go breathing the fumes for extended periods of time, but holding a pool in your hand in science class isn't going to kill you.

That's why it's a bit frustrating to read stories like this where the cleanup crew goes overboard and racks up tens of thousands of dollars worth of bills for a simple spill.

Breathing the fumes for an extended period of time? That's exactly what we would have had without the remediation.

Not necessarily, since there was nothing to vaporize it. He even shows an old picture he'd taken of it where the drops had sat undisturbed for so long that they had a chance to oxidize.

The techs measured vapor at 37,000 ng/m3 after the first day of cleanup, at which point there was no longer any easily visible mercury. Like water, mercury doesn't need something to vaporize it; you just end up with some vapor as long as there's liquid present.

(Post author here.)

Yup, we did that. Also, they gave us some freon in a baggie to play with phase change, and we used carbon tetrachloride and benzine in our o-chem class like it was nothing. That stuff's all off limits these days I guess, along with "real" chemistry sets for kids.

Our high school science teacher went to school in the late 1950s. He told us his science teacher used to demonstrate that you could plunge your hand into a container of mercury and swirl it around, just lovely stuff... until one day his gold wedding ring snapped in half, because the mercury had degraded it.

I used to play with those (mercury blob mazes) at electronic/junk shops when I was a little kid. Currently I've got a small collecting of mercury switches and rather large jar of mercury in the basement... It's neat stuff.

Oh. I had one of those that I played with for quite a while as a kid. I'm guessing it was from Edmund Scientific.

What's really crazy is that apparently some people have the idea that mercury is an 'investment' and will voluntarily keep jugs of it in their home: http://www.ert.org/products/mercury_response_guide/Attachmen...

That document turned out to be a very interesting, thorough read. I think it's more crazy that mercury is apparently still used in ritualistic/spiritual contexts.

That document says, "People often keep jars of mercury in their homes because they think that mercury is worth money, like liquid silver. In reality, mercury is nearly worthless, but the cleanup cost after a large spill easily can exceed the cost of a home."

http://minerals.usgs.gov/minerals/pubs/commodity/mercury/mcs... gives the price of mercury as US$1850 per 76-pound flask, up from US$1076 in 2010. That's US$54/kg, or US$730 per liter at 13.5 g/cc (cf. https://en.wikipedia.org/wiki/Mercury_%28element%29). Silver is currently http://www.cmegroup.com/trading/metals/precious/silver.html US$15.76 per troy ounce, which is US$506.70/kg or US$5315 per liter at 10.49 g/cc (cf. https://en.wikipedia.org/wiki/Silver). Silver also has the advantage that it won't make you sick if you spill it.

As a point of comparison, copper is sufficiently expensive that people steal copper pipes and wires from unoccupied houses. Copper costs US$2.41/lb. (US$5.31/kg), less than 1% of the cost of mercury. The junk man in the slum where I'm going this afternoon will pay you AR$35/kg for it, which is US$2.23/kg, which is enough to incentivize the cartoneros to break the yokes off any CRT discarded on the street within hours. (He doesn't list a price for mercury on his sign.)

So "nearly worthless" seems like an exaggeration — mercury is worth more per liter than any other commodity substance you're likely to have in your house other than silver and Freon-22 — but it also doesn't seem like a really smart investment, especially if you have kids.

I'm not sure it's exaggeration. Who do you sell your jug of mercury to at $1850/flask...? Would any scientific or industrial consumer want to buy random flasks of unknown quality from laymen at fair prices? Just quoting bulk commodity prices for mercury is like noting that a particular diamond costs you $2k at the department store and assuming that you must then have an asset worth $2k.

Your analogy is a little off: $2k at the department store is not $2k in the Antwerp diamond markets. The USGS prices are for wholesale markets, not retail mercury.

The recycling shop in the slum has to deal with the same issues with the copper they handle. My price from his sign was out of date, perhaps due to our world-leading inflation: he pays AR$45 per kilo, which is US$2.87. The difference between that US$2.87/kg and the US$5.31/kg that CME copper contracts trade at is exactly the cost of converting random chunks of copper of unknown quality bought from laymen into copper acceptable to scientific and industrial consumers, plus his profit.

If you're not a neoliberal, you could reasonably argue that it's unfair that the junk man pays you only half of the bulk commodity price for your copper. This does not defeat the point that the price he pays is sufficient to motivate people to aggressively recycle copper. In fact, even the AR$8/kg he pays for aluminum is high enough that cartoneros remove heatsinks from discarded computers.

Maybe whoever handles mercury recycling in the US is willing to pay somewhere between 25% and 50% of the bulk commodity price for jugs of metallic mercury of unknown purity. In fact, maybe they'd be willing to pay even more: maybe removing the impurities from a kilogram of impure mercury only costs one to five times as much as removing the impurities from a kilogram of impure copper, not ten times as much. The USGS report I linked notes that more than 50 companies in the US currently collect mercury for recycling from "Mercury-containing automobile convenience switches, barometers, compact and traditional fluorescent lamps, computers, dental amalgam, medical devices, thermostats, and some mercury-containing toys," and even more companies collect metallic mercury.

…that said, my attempts to find offers in the US on the internet to buy mercury for recycling for anything approaching US$54/kg are not finding anything. At all. So maybe the EPA guy is, in practice, correct.

> $2k at the department store is not $2k in the Antwerp diamond markets. The USGS prices are for wholesale markets, not retail mercury.

A retail consumer investor, who is storing it in their home, is paying retail consumer prices. They aren't showing up at the cinnabar mines and tapping a spigot for bulk prices. My diamond analogy is exactly correct. That's why it's a scam: because you are paying inflated prices for something you cannot possibly sell at anything remotely like what you paid for it, and in the case of mercury, it's worse than if you bought some diamonds because at least diamonds aren't ticking timebombs.

you're saying you pay the spread because you're taking prices, not making them. diamonds have a huge spread at retail, and so you get screwed; gold's spread is so low that you can actually make money doing this, although more or less only by chance. i'd've expected mercury to be more like gold, but so far i can't find much evidence of a current functioning mercury market.

At least in the case of gold, there's a very large retail market with lots of connections to the investment market, and as far as I know, gold is easy & safe to store & refine, so if you sell some scrap gold to a gold dealer they don't have too much trouble refining it into something standardized. The rarer something is, and the more dangerous, the more you're going to pay in costs.

Basically I agree with everything you say, with one exception. There are many methods to refine gold, but none of them are particularly safe, involving, for example, the evaporation of substantial amounts of mercury, gold cyanidation (what Turing's mother believed killed him), chlorine gas, or boiling aqua regia. This kind of thing can be made safe, but it's even more difficult than making mercury processing safe.

So I suspect that the main issue is storage and transportation, not refinement.

Does US$38k to clean up a few cups of mercury seem ridiculous to anybody else? That would be a very dangerous quantity of mercury if it were in a form like dimethylmercury, but it was metallic mercury. Wouldn't it make more sense to dump some powdered metal into it to amalgamate it, sweep it up and put it in a bag, and open the windows to let the house air out for a day or two?

This was my thought as well - I've heard metallic mercury is relatively safe. However, a little bit of googling turned up this:


The issue with metallic mercury is the vapors are easily absorbed through the lungs, and not easily filtered (requires an activated carbon filter).

It is indeed relatively safe, in the sense that it takes thousands of times as much metallic mercury to kill you as it would take dimethylmercury. But vapors from metallic mercury have been known to cause acute poisoning for centuries; that article mentions a well-known case from 1810.

According to the article they had to disassemble floor and wall to get access. So definitely not a simple sweep-up job.

I know the family in question. They're both competent and frugal (they save so they can donate heavily to charity). They wouldn't spend $38k without good reason.

They might be suffering from scrupulosity, even if they are neither incompetent nor spendthrift. In fact, I would think that scrupulosity would tend to promote competence, frugality, and donating heavily to charity.

The whole story seems ridiculous. When I read about calling the fire department I knew it was going to be a long ride of bureaucratic insanity. My dad used to play with mercury as a kid and apparently that was common. I think he would have swept it up and saved $38k.

Knowing what you now know about mercury toxicity, would you have done that? Would you have done that with your young child in the house?

Why not sweep it up yourself, and then have the professionals check for trace amounts?

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