Protocols for Insurance to Maintain Privacy

["John Kelsey" <kelsey@plnet.net>]

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[ To: Cypherpunks ## Date: 11/01/97 ##
  Subject: Protocols for Insurance to Maintain Privacy ]

>Date: Wed, 29 Oct 1997 09:24:39 -0700
>From: Tim May <tcmay@got.net>
>Subject: Protocols for Insurance to Maintain Privacy

>There are interesting protocols which can be used to skirt
>statist laws about insurance. A la carte insurance, for
>specific illnesses, is one of the best examples. Thus, a
>heterosexual male who doesn't use IV needles can "opt out"
>of coverage for AIDS-related treatments, thus transferring
>the effective cost to those most worthy.

I can see practical problems with this (like finding out
that the fine print on page 248 of my insurance contract
turns out not to cover dog bites that occur on Thursdays),
but it's really just letting customers buy only what they
want.

>This has similarities to crypto protocols. And anonymity. To
>wit, it is possible to arrange anonymous blood tests for
>various conditions. So, Alice arranges a distributed set of
>such tests, perhaps at multiple labs. When she finds she has
>no preconditions or precursors for Diseases A, B, C, and D,
>she opts out of being covered for these diseases.

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

On the other hand, information isn't free--I have to spend
some money for each of the hundreds of genetic tests
available.  There may be a profitable business in providing
a battery of genetic tests for a large up-front fee, in a
sort-of inverse-lottery scheme--if you get unlucky enough to
have one or more of these disease precursors, we pay your
insurance costs, or at least give you a big bundle of money
to spend as you will.  This is subject to various kinds of
abuse (if you know you're predisposed to get some disease,
you have a strong incentive to enter the ``lottery''), but
it still might work.

>--Tim May

   --John Kelsey, Counterpane Systems, kelsey@counterpane.com
 PGP 2.6 fingerprint = 4FE2 F421 100F BB0A 03D1 FE06 A435 7E36

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   --John Kelsey, Counterpane Systems, kelsey@counterpane.com
 PGP 2.6 fingerprint = 4FE2 F421 100F BB0A 03D1 FE06 A435 7E36