From: Tim May <tcmay@got.net>
Date: Tue, 4 Nov 1997 02:37:56 +0800
To: "John Kelsey" <cypherpunks@Algebra.COM>
Subject: Re: Protocols for Insurance to Maintain Privacy
In-Reply-To: <199711031657.KAA08353@email.plnet.net>
Message-ID: <v03102803b083b7b75331@[207.167.93.63]>
MIME-Version: 1.0
Content-Type: text/plain



At 10:02 AM -0700 11/3/97, John Kelsey wrote:

>One problem with this is that, if it becomes widespread,
>nobody will ever buy insurance for these diseases unless
>they have it or probably will get it.  This kind-of defeats

Such insurance is now common. A boat owner doesn't buy insurance for
iceberg collisions if he is never in arctic waters, a small plane pilot
doesn't buy cargo insurance if he doesn't ferry cargo, and so on.


>the point of having insurance, which is to protect yourself
>from low probability high cost things happening.  That is,

I have a different view of what insurance is than John does.

What insurance is, and how it is priced, is too long a topic to get into
here. Suffice it to say that the insurance company makes its profits by
charging more for coverage than it pays out. And the customer, of course,
tends to lose the differential.

Each side tries to get as much information as possible. If Joe Client knows
he never pilots a cargo plane, he doesn't opt for cargo insurance. If Joe
Client knows he never engages in unprotected sex with diseasy prostitutes,
etc., he skips HIV insurance. The fact that some "low probability events,"
like meteor strikes, are uncovered is part of the price of keeping Joe's
premiums tolerable.

>before I've taken the test for genetic disease X, my best
>estimate of the probability that I will test positive is
>very low.  Once I have taken it, I know the result.  If I
>sign up for a-la-carte insurance for this disease, the
>insurance company effectively knows I must have tested
>positive for a predisposition to it, and so either won't
>give me insurance, or will give me insurance only at an
>extremely high rate (corresponding to a 1/10 chance of
>getting the disease, rather than a 1/1,000,000 chance).

This is the idea. It causes those with the predilections to the disease to
pay the high coverage costs.

The alternative is not pretty: banning private testing (how?) and forcing
insurance companies to cover all applicants for all conditions at a fixed
rate.

--Tim May

The Feds have shown their hand: they want a ban on domestic cryptography
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
ComSec 3DES:   408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Higher Power: 2^2,976,221   | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."