Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

What makes gambling wrong but insurance right? (2017)

bbc.com

Post reply on HN
Print view View original

121–130 of 328 posts

Re: What makes gambling wrong but insurance right? (2017)

#121

Post by sholladay »

Almondsetat wrote: post #5

Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…

So far, I have made use of my car insurance policy two times. Each time I regretted it. First was for a rodent that somehow got into the space between the roof and the headliner, then died and made a mess. The second was for hitting a pothole at highway speed, which damaged a wheel and its control arm.

In both cases, the insurance company paid the minimum they had to. For the rodent, sure they paid for the ceiling to be disassembled, fixed up, and reassembled. But did they pay for the interior detail that was necessary because of the rodent guts that had dripped from the ceiling? No, of course not.

For the pothole, they paid for the wheel and control arm replacement and even one new tire. But did they help me pay for a tire on the other side so the wear could be reasonably symmetrical? No, of course not. How about the alignment I obviously got, which isn’t strictly necessary but really should be done after such an incident and installing a new drive wheel? No, of course not.

Oh and they categorically consider hitting a pothole to be the driver’s fault, no matter the circumstances, so they raised the insurance premium on me. They made all of their money back within 18 months and now I’m still paying the higher rate.

Insurance is such a scam. The company makes a profit despite their team of employees because they always price the premium above your level of risk. If the math made any sense for the customer, the company would break even or go bankrupt.

I wouldn’t have insurance but it’s required in my state.

The one good thing I can say about it is it helps ensure victims of car accidents get their medical bills paid for regardless of the financial status of the driver.

Re: What makes gambling wrong but insurance right? (2017)

#122

Post by akira2501 »

Gambling is played through "games of chance." Which is all you're betting against.

Insurance is priced through "underwriting." Which measures the value of the underlying economic activity or instrument within the fair market and puts a contract price on it's guarantee for a limited period of time and specific purpose.

There's also broader forms of historical "insurance" such as the maritime law of "General Average." Which further highlights the differences between the nature of insurance versus the nature of gambling.

Re: What makes gambling wrong but insurance right? (2017)

#123

Post by akira2501 »

karaterobot wrote: post #28

I have to challenge the premise here. I don't hear people saying gambling is wrong and insurance is right. My guess is most people consider gambling a harmless vice most of the time, and consider insurance an annoying fact of life. Now, people consider problem gambling a problem, but that's a tautology. Many people also think casinos are predatory, but wait 'til you hear what they think about insurance companies.

The reality is insurance is a product regulated by the government and gambling is a product often outlawed entirely by governments.

Re: What makes gambling wrong but insurance right? (2017)

#124

Post by throwawaymaths »

hattmall wrote: post #120
beloch wrote: post #64

Earlier quoted context omitted.

Having insurance is gambling, but not having insurance is also gambling. This is because life itself is a gamble. We don't know what the future holds and we have the choice to insure or gamble on just about any aspect of our lives. Insurance companies are just like casinos in that the math always favours them if you look at a sufficiently large sample size. Even so, some things are still worth insuring. e.g. Your hou…

Only thing I insure is umbrellas. They never last more than 2-3 years and a 7 year replacement plan for like 8.99 is a reasonable deal. Anything else I tend to just go with credit card purchase protection and MFR warranty.

Insuring your tires at discount tire/America's best tires is always worth it too.

Re: What makes gambling wrong but insurance right? (2017)

#125

Post by hattmall »

beefnugs wrote: post #99
beloch wrote: post #64

Earlier quoted context omitted.

Having insurance is gambling, but not having insurance is also gambling. This is because life itself is a gamble. We don't know what the future holds and we have the choice to insure or gamble on just about any aspect of our lives. Insurance companies are just like casinos in that the math always favours them if you look at a sufficiently large sample size. Even so, some things are still worth insuring. e.g. Your hou…

What about the gamble that the whole thing is a scam from the beginning? If they are going to fight tooth and nail to never payout anyway its all insanity. Also how could insurance ever be a "for profit" business? That could never work. Profit means straight up planning scam right from the beginning, hoping that a big enough payout triggers business failure and you dont have to pay out anyone, yippee free and clear r…

>Also how could insurance ever be a "for profit" business?

What? They plan to take in more in premiums than they pay out in claims by managing risks and underwriting.

In that sense it's like a bookmaker who plans to set a line on a game that results in bets not having an imbalance that outweighs their vigorish. In cases where they do they lay off bets on other bookmakers. It's why they tend to be concentrated on certain areas and the same is true for insurance.

Both of those are legitimate for profit businesses that use statistical modeling and risk management to turn profits and provide value to customers.

Re: What makes gambling wrong but insurance right? (2017)

#127

Post by hattmall »

adw wrote: post #93
pdonis wrote: post #81

Earlier quoted context omitted.

> That is true AND it is not what you paid for. You're qubbling. You paid for replacement of the income and goods and services you can no longer provide, in the event of your death. Sure, that doesn't replace you in the eyes of your beneficiaries (assuming we're not taking the extremely cynical viewpoint about that), but of course nothing can replace you in that sense. However, if your beneficiaries are financially s…

No, the other poster is actually right. In betting on outcomes, there are two roles - bet (“long”) and lay (“short”). An insurance company is exactly a bookmaker; they are buying a bunch of risk and being paid a vig (or in the case of long-duration bets and life insurance, getting the carry) on each of those risks. This is indistinguishable from insurance, particularly when the beneficiary of insurance isn’t the subj…

In your scenario, you are using gambling as insurance, and that's different. If you bet $20 on the Greenfeet it's not because something bad happens to you if they win.

Re: What makes gambling wrong but insurance right? (2017)

#128

Post by randomdata »

refurb wrote: post #126

It seems obvious? Insurance means you pay to protect against a loss, gambling is paying to potentially gain? Most insurers will not insure you unless you are at risk of a loss. For example, you can't buy a homeowners policy for a house you don't own.

> Most insurers will not insure you unless you are at risk of a loss.

This is why it is non-obvious. There is no risk of loss without a gamble. As you point out, insurance only comes into play when you are gambling – you cannot insure that which you have not gambled on. So if gambling is wrong, why is a tool to help you gamble right?

Re: What makes gambling wrong but insurance right? (2017)

#129

Post by majormajor »

sholladay wrote: post #121
Almondsetat wrote: post #5

Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…

So far, I have made use of my car insurance policy two times. Each time I regretted it. First was for a rodent that somehow got into the space between the roof and the headliner, then died and made a mess. The second was for hitting a pothole at highway speed, which damaged a wheel and its control arm. In both cases, the insurance company paid the minimum they had to. For the rodent, sure they paid for the ceiling to…

> I wouldn’t have insurance but it’s required in my state.

Does your state require comprehensive/collision insurance? I've only lived places where you would be permitted to get liability-only insurance which would specifically not cover either of the situations you think you got screwed on.

(Neither of which is why most people get insurance anyway. You get car-insurance beyond the legal minimum because while you will likely pay more in the long run, you won't have to deal with a surprise tens-of-thousands replacement bill out of nowhere if you accidentally total your car. Or because you have a loan and your lender doesn't trust you to go without it - of course, if you truly don't need insurance for something, you likely don't need a loan for it either. This is generally non-controversial and the "obviously it's a bad deal because the insurance company exists and pays salaries" hot take is... duh? well known? not an insight?)

Post reply on HN