It’s important to note that there are no bad intentions behind this mechanism; it’s just an unfortunate consequence of the way insurance works.
Zero Everything
Shai Wininger

Even though this remark (and article) is made with respect to P&C insurance, the point is still disingenuous. Plenty of markets *do* offer first-dollar or first-day coverage — and price accordingly. Trouble is, claims are “induced” to such an extent that pricing can be tricky. In fact, Medicare is toying with the elimination of first-day benefits in an attempt to control its runaway debt. It’s not a question of “deterring nuisance claims,” but only ever an affordability balancing act. There are various schools of thought regarding the role insurance should play: some say its only purpose should be low-frequency but catastrophic events. Others say it should cover high-frequency but low-cost events. Sometimes we find both types of coverage addressed in the same market, which is why it’s a bridge too far to say some mechanism is simply “the way insurance works.”

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