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Please correct me if I am wrong, but as far as I can tell there is no advantage to the insurers, with respect only to the returns on policies, in producing accurate assessments of individual risk levels, as compared with only accurately assessing the aggregate risk level - the expected return is the same either way (and I would imagine that the individualised assessment is much more challenging).

Assuming I am correct about that, then the advantage to them of providing individualised premiums is to appear competitive in the market place, by being able to confidently match their premiums to individual risk levels, and thus being able to advertise (the possibility of) lower premiums.

Again assuming all of that is true, then there really isn't any net benefit - in fact presumably we have to pay for this whole individualised risk assessment exercise, which will actually raise the total costs.

More speculatively, I imagine that their job is made somewhat easier by cognitive biases that cause people to think, on average, that they are better than average at (for example) driving.




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