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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)

#171

Post by michaelt »

dazc wrote: post #163
sholladay wrote: post #121

Earlier quoted context omitted.

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…

In the UK we have multiple insurers competing fiercely on price, to the point where many lose money year on year. People still say it's a scam though because their experience when making a claim doesn't play out like they expected. I think part of the problem is the unseen costs of long-term hire cars, injury compensation and outright fraud that has become an everyday expense that someone has to pick up the tab for?

> People still say it's a scam though because their experience when making a claim doesn't play out like they expected.

A friend of mine had her insured bicycle stolen.

It was locked up with an extremely heavy chain and lock, which were rated 'gold' by insurance companies for locking up motorbikes. Her insurance denied the claim, because the chain wasn't gold rated for locking up bicycles.

By all means get insurance - but when their marketing talks about being on your side or providing peace of mind, you gotta realise that weaselling out of paying claims is a big part of their business model.

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

#172

Post by bluecalm »

beloch wrote: post #64
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…

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…

>>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.

You could say insurance is an attempt to stop the fortune to gamble against you for a specific case (like flooding your house). You are already the party in a gamble and insurance is a way out.

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

#173

Post by infecto »

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…

Of course insurance companies need to make a profit. That does not mean they are scams. Hitting a pothole will almost always be either your fault or the local governments fault. Insurance companies are incentivized to make competitive quotes when possible.

Your thought of not having insurance demonstrates you are not thinking about this the right way at all. Your state requires liability which will pay out claims against yourself.

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

#174

Post by scott_w »

efitz wrote: post #164
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…

And that is one of the reasons why medical insurance is so crazy in the United States nowadays - it’s no longer used to hedge catastrophic unpredictable events (which used to be called “major medical”), but instead is used to pay for normal, minor consumption or for chronic conditions. In other words it’s no longer like a bet, it’s like a discount plan. But the problem is that the complexity of introducing a third pa…

> But the problem is that the complexity of introducing a third party payer who doesn’t want to pay, and a consumer who has no incentive to self regulate consumption, means that the costs spiral up and up.

The first part is correct but a consumer that “doesn't self regulate consumption” is not a thing in medicine. People don’t take drugs for fun. People don’t injure themselves more in public healthcare systems. In fact, a huge problem in medicine is getting men to go to the doctor before issues become critical (and more expensive).

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

#175

Post by infecto »

michaelt wrote: post #171
dazc wrote: post #163

Earlier quoted context omitted.

In the UK we have multiple insurers competing fiercely on price, to the point where many lose money year on year. People still say it's a scam though because their experience when making a claim doesn't play out like they expected. I think part of the problem is the unseen costs of long-term hire cars, injury compensation and outright fraud that has become an everyday expense that someone has to pick up the tab for?

> People still say it's a scam though because their experience when making a claim doesn't play out like they expected. A friend of mine had her insured bicycle stolen. It was locked up with an extremely heavy chain and lock, which were rated 'gold' by insurance companies for locking up motorbikes. Her insurance denied the claim, because the chain wasn't gold rated for locking up bicycles. By all means get insurance…

Weasel? How do you expect it to work? There is a contract and the company is going to follow it.

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

#176

Post by infecto »

pipes wrote: post #165
sholladay wrote: post #121

Earlier quoted context omitted.

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…

In the UK damage caused by potholes can be claimed back from the local council. It's a pain in the ass but worth pursuing. I'm surprised the USA doesn't have the same. (Assuming you are in the USA!)

I believe most states have some ability to do what you describe. It’s a PITA too though.

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

#177

Post by infecto »

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…

I am sure your life experience shapes that opinion but it is far from the truth. I don’t think these business ever hope for a total loss. It would make no sense.

I also don’t think a nonprofit or government can do an adequate job of offering insurance. Let’s ignore health insurance but rather define insurance in the base form as an entity paying out if an event happens.

In a for profit model you have multiple agents each evaluating risk and the costs to cover that risk. Ideally enough agents exist that they compete to keep costs low. Certainly sometimes this is not always true.

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

#179

Post by scott_w »

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…

> the goal is different, but the object used is not.

That’s not how the English language works. Insurance is a noun (I have insurance) but gambling is not (you can not possess a gamble). In your analogy, you would “cook” your food or “commit arson.” The purpose of your action is intrinsically tied to the words we use to describe it.

Gambling is engaging in a game of chance to get a favourable outcome. Insuring is paying money now to mitigate the risk of losing more money later. The fact that both are financial activities doesn’t mean they’re the same thing.

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

#180

Post by abenga »

efitz wrote: post #164
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…

And that is one of the reasons why medical insurance is so crazy in the United States nowadays - it’s no longer used to hedge catastrophic unpredictable events (which used to be called “major medical”), but instead is used to pay for normal, minor consumption or for chronic conditions. In other words it’s no longer like a bet, it’s like a discount plan. But the problem is that the complexity of introducing a third pa…

And that is why the insurance model should not be used for healthcare. For example, why should an insurance company charge you anything less than the cost of treating a chronic illness after diagnosis? Why should the minimum price of giving birth not be the exact premium you pay? None of those are surprises (after the initial diagnosis or conception, of course, and it can obviously be argued that birthing complications can be insured against too), so there is no reason to use probabilistic models to pay for them.
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