BUG: Balance issue with banking/insurance companies related to economic status

[mohmaaytah]

True, additionally I transferred a lot to it as I recall. I am more intrigued by the guy who tops the rich list, if you check his profile he opens the company then nothing. The company itself has almost no assets. When you look at the list of top 100 you will see that most of the money was made through stock trades which while possible it affects game balance.

Either way as per your advice I started a new game with numerous changes:
Reduced competitors from 30 to 20
Reduced number of AI persons to (8+20)
Donations to political parties 50 (to absorb extra cash)
Aggressiveness of AI banks and insurance companies : Very High
Insurance premiums modifier to 75
Insurance claims to High

Results are as follows as of 2022 (starting year 1990):
2 competitors operating exlusively in insurance with 10 and 17 branches (all I have is insurance HQ but no branches), both have not turned a profit
2 competitors in banking (one exclusive, one diversified) with 96 and 17 branches, turning good profits in both

I will try expanding in insurance and reporting the results back here. I think to balance insurance I should leave one of either the premiums modifier or claims on default otherwise it kills the business but will try that in a later game.

Cheers

[David]

Since it can be subjective to judge whether a company is too profitable or not profitable enough, I think the most accurate rate to assess whether an insurance company's profitability is reasonable is to look at its average Return on Equity over the past 30 years.

You may run a number of games and record the average Return on Equity over the past 30 years of insurance companies in these games. If the average Return on Equity of all these games is within the range of 10% to 14%, then the profitability of insurance companies are reasonable and the current default settings of insurance premium and insurance claims need not to be changed. If that is not the case, then it will make sense to change the default setting of these parameters to improve the gameplay balance.


Research source:
"As of April 2015, the average ROE for an insurance company with positive earnings and shareholders' equity is about 12.1%. ROE is calculated as the insurer's net income divided by the common shareholders' equity. ... Increasing ROE signals the insurer is able to effectively use its capital and improve its return."

Article: https://www.investopedia.com/ask/answer ... sector.asp

The 10% to 14% range mentioned above is based on 12.1% roughly -2% to +2%

[saferain]

What needs to be changed is not the insurance company, but the global stock market. Insurance companies buy global stocks, and as stocks rise and fall, profits increase or decrease accordingly.

[David]

What needs to be changed is not the insurance company, but the global stock market. Insurance companies buy global stocks, and as stocks rise and fall, profits increase or decrease accordingly.

I understand that you suggested reducing the volatility of the global stock market.

Since the volatility of stocks in the real world is also high, if you compare the stock price movements of the global market in the game with those of stocks in the real world, you would find the current simulation of the global stock market is actually quite realistic.

Our concern of reducing the volatility of the global stock market is that it will make the global stock market less realistic.

[saferain]

The economic cycle of the game is very reasonable. It is very similar to the real business cycle. My suggestion is that during the economic ups and downs, most stocks should not go up or down all the time. All stocks in real life are also full of uncertainty. This game is too regular. In custom games, reverse inflation, and high cycles, I have tried many times. In most cases, insurance companies will go bankrupt during the third financial crisis.

[David]

My suggestion is that during the economic ups and downs, most stocks should not go up or down all the time. All stocks in real life are also full of uncertainty.

I think this is a bigger topic that we need to invite more people to discuss as there is no absolutely right or wrong way on this.

Some people may think that it is necessary for the stock market in the game to fluctuate greatly in tandem with the economic cycle. On the other hand, some may not think so.

If you are interested in further discussing this, I would recommend that you create a new topic and invite the community to discuss.

[mohmaaytah]

Apologies I have not been able to get back with more concrete figures, my virtual machine was inaccessible for a while and just sorted out. Will run the rest of the simulation and update.

[mohmaaytah]

Just to report back on the 30 year average ROE.

Banking: 1.7%
Insurance: 2.51%

[David]

Please download the latest patch v6.4.12 from http://www.capitalism2.com/forum/viewto ... f=7&t=7601

In this version, the claim rates of Insurance companies are adjusted slightly higher for better gameplay balance.

[David]

The latest post-release beta version 6.5.00 has improved the formula for determining the stock price of banks and insurance companies for reducing the stock fluctuation caused by irregular spikes or collapses of profits.