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What makes gambling wrong but insurance right? (2017)

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

#151

Post by lucianbr »

gmane wrote: post #105
yamrzou wrote: post #54

Earlier quoted context omitted.

> Insurance brings other benefits that improve your life. What other benefits besides the money that covers the losses?

Hedging risk. This is often a hard concept for people to grasp: there is value to hedging risk. It (generally) cannot be turned into money. There is extrinsic value to reducing risk.

But you are only able to hedge the money part of the risk. Life insurance does not bring anyone back, and health insurance only repairs your health as much as can be done with money. You can't insure against incurable diseases, as in the risk remains. You will just get some money to hopefully feel better, or for your children.

Same with insuring some painting let's say. You can get enough money to buy a different painting, but the risk of losing that particular painting is still there. If it is a unique painting and it gets lost, how are they going to repair the non-monetary value of it? They can't.

Hedging the risk of being shot by wearing armour sounds like actual hedging. Buying insurance against being shot sounds like just betting. The non-money part is exactly the difference, and it is missing in insurance.

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

#152

Post by devbent »

bruce511 wrote: post #150
throwawaymaths wrote: post #124

Earlier quoted context omitted.

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

I expect this is true depending on where you are, and the quality of roads you drive on. I've been driving for 36 years now and have never had a tired damaged more than the very occasional puncture. I could go out tomorrow and damage one, but by this point I can consider myself "self insured".

> I've been driving for 36 years now and have never had a tired damaged more than the very occasional puncture.

I typically go through a tire a year. The city I live in (Seattle) will pay to replace the tire if the loss was due to a pot hole, but you have to take a picture of the pot hole, which can be a bit hard to do in many circumstances.

There have been years where I've paid more for tires than for gas. :/

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

#153

Post by Mathnerd314 »

mpreda wrote: post #148
tjohns wrote: post #135

Earlier quoted context omitted.

Insurance is primarily for major events. The things at the extreme upper end of the bell curve. For example, you've hit another car (possibly an expensive one) and caused tens of thousands of dollars in damage. Or you've inured a passenger and caused hundreds of thousands of dollars of hospital bills. The kinds of events that would financially ruin you, or at least seriously set you back on your life goals. Or, in th…

> Insurance is primarily for major events. The things at the extreme upper end of the bell curve That's how it should be, but isn't because all insurance contracts cap the maximum insured amount. So that's absolutely NOT the "extreme upper end of the bell", not at all.

There are unlimited umbrella policies, but practically past 1 million or it is probably cheaper to declare bankruptcy than pay the additional premiums.

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

#154

Post by baruz »

hattmall wrote: post #125
beefnugs wrote: post #99

Earlier quoted context omitted.

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 cert…

> take in more in premiums

Also, prudently investing the insurance float (excess premiums beyond that needed for claims)

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

#155

Post by Dylan16807 »

adw wrote: post #144
Dylan16807 wrote: post #137

Earlier quoted context omitted.

In general, you are not able to buy insurance for more than the value of something. If you could, that would be a form of gambling. But up until that line it's anti-gambling. Buying a position out of nowhere is gambling. Buying a position to directly counteract the position you already have is not gambling. If you short 50 shares of a stock when you already owned 80 shares, you are doing the opposite of gambling. You…

I would describe every single one of these as active risk management - and the difference between one sort of active risk management and another is vibes, not reality. There’s an implied moral judgment here that gambling is inherently bad. I don’t think gambling is inherently immoral; I think mismanaging risk (in either direction) is one of the ways people mess themselves up and therefore encouraging people to take b…

The difference is not vibes! Reducing your position is the opposite of increasing your position, and those things are very objective.

If someone has an equal number of short and long shares in a single company, they are not gambling. Surely we can agree on that, right? We don't have to use the word gambling, we can say they're not investing either. Their money does not change at all based on the stock market or any other external factors.

Now what if they have more short or more long shares. We can say that gambling or investing is happening, right?

What do we call the process of moving from a net-nonzero position toward net zero? Isn't it the opposite of gambling? Or the opposite of investing?

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

#156

Post by gnicholas »

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.

What credit cards offer protection these days? All of mine seem to have done away with it. For umbrellas, I bought a Tumi, which is insanely expensive (was $40 when I got it; I think it's closer to $60 now), but which has a lifetime warranty.

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

#157

Post by sethammons »

FireBeyond wrote: post #139
snotrockets wrote: post #132

Earlier quoted context omitted.

Mind you, in the US, you are not allowed to take a life insurance on a person you don’t know (but you are allowed to buy a life insurance that person had taken on themselves)

Cue flashbacks to Walmart buying life insurance for its employees (with Walmart as the beneficiary)... ... and the oh-so-charming way they referred to it at head office: "Dead Peasants Insurance".

It is a derogatory industry term, also called janitor insurance. I can't find a source that says they called it that internally, which I think is relevant to the image being painted.

I did find that winn-dixie (a grocer) insurance consultants did use the term internally. Source: https://www.wsj.com/public/resources/documents/april_19.htm

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

#158

Post by thephyber »

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…

This is mostly wrong.

Gambling doesn’t require that you “risk it all”. In this way, your entire post looks like it’s arguing against a straw man.

There is a way to gamble in which it is very similar to insurance — extremely defensive and conservative. But that means the gambler isn’t “enjoying” gambling, they are instead just being an accountant, but not earning a salary for it.

They are both games of chance, but you fail to point out why gambling is most frequently outlawed: it is a compulsive behavior that becomes addictive in some people. When 11% of a society can’t maintain a gainful living (maybe they can’t hold a job or they become a habitual liar or a thief to feed their habit), governments tend to step in to dissuade the problematic behavior.

But most people who gamble frequently tend to do it with their lizard brain and most people who purchase insurance do it with their cognitive brain (even if the underlying reasons aren’t based on facts).

Then again, the premise of the question is arguably wrong. The state lottery is one of the biggest forms of gambling and that isn’t illegal (even though the origins were to supplant similar mob-run games).

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

#159

Post by csande17 »

lucianbr wrote: post #145
hattmall wrote: post #127

Earlier quoted context omitted.

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.

Isn't the fact that you cand use gambling as insurance and insurance as gambling support the idea that they are the same? If it all depends on the context, then it's not the activity that is different, but the context. To me it sounds like you're saying whenever you like it, you will call it insurance, and whenever you don't like it, you will call it gambling. "It" is not apriori anything, until you have decided what…

You can use some gambling products as insurance, but insurance products are designed so you cannot use them as gambling. At least in terms of products sold broadly to the general public, which is the main situation where people worry about gambling being immoral.

As other commenters mention, the main way this works is by making it impossible to "win" at insurance. You aren't hoping for the rare payout event to happen, like you would be when gambling. Having your house burn down, or getting into a car accident, or needing treatment for cancer, or dying are all really bad even if insurance reimburses the monetary costs involved.

This is probably why the concept of "insurable interest" exists; without it, it would be possible to use insurance products as gambling.

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

#160

Post by JeffL »

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…

Insurance for the consumer is lowering your expected value to reduce variance. Gambling for the consumer is lowering your expected value to increase variance. The profit and operating costs for both casinos and insurance companies is the lost EV of their patrons.
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