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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)

#191

Post by graemep »

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?

I think one of the problems in the UK is too much of the competition is just on price. People buy what is cheapest on a price comparison site. They do not consider reputation for trying not to pay, or customer service very much (because there are either no metrics or unclear ones).

The same applies to things like internet connectivity. People look only at price and download speed.

I also think it is not worth claiming for minor things and you keep your no claims bonus - therefore you might as well get a policy with a higher excess.

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

#192

Post by ossobuco »

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…

You can approach gambling in the same exact way. It's called hedging your bets.

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

#193

Post by globular-toast »

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…

Bicycle insurance is mostly useless unfortunately. We really need to do something about it if bicycles are going to be practical for more people. Cars get probably 100x the Police resource dedicated to them compared to bikes.

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

#194

Post by klyrs »

baruz wrote: post #154
hattmall wrote: post #125

Earlier quoted context omitted.

>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)

> prudently investing the insurance float

More gambling! What I find interesting about this question is that insurance companies are the real gamblers. Attempting to frame their clientele as gamblers approaches absurdities such as a limited opportunity to spend, and most importantly, a strict cap on "reward" lower than the cost to "play" (entry fee for a new car is the policy rate plus a car of equal or greater value).

Whereas insurance companies are gambling on both ends: with their customers' potential losses and with their float on the investment market.

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

#195

Post by greg_V »

mungoman2 wrote: post #186
bluecalm wrote: post #168

I feel the article as well as most of the comments miss the most important difference between the two. Insurance, assuming the fee isn't too high, increases your utility of money while gambling decrease it. If there is an event that happens 1 time in 100 that costs you $100k and you pay $1.05k to insure against that would have a negative expected value in money terms but positive expected value in utility of money te…

Hm I don't follow. Could you please define "expected value in money terms" vs "expected value in utility of money terms"

It's a convoluted way of saying "use value" vs. "exchange value".

A million dollars is a million dollars, or it's a house. I don't need a million dollars but I do need a house or I freeze to death. I can't eat a million dollars worth of food but I need to eat food every day or I die.

Gambling is seen as immoral because it's about extending your exchange value capabilities, although most people who gamble are poor as dirt and a winning bet is often about paying your utility bills and having a day out over being able to do neither (while losing bets contribute to being unable to do either).

Insurance is seen as prudent because it acts as a fail safe over your use values, be it your health, housing, employment, etc. Social security is basically a system of spreading the odds over the population, forcing everyone to do the small bets to contain the catastrophic outlier probabilities - in theory.

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

#196

Post by graemep »

mungoman2 wrote: post #186
bluecalm wrote: post #168

I feel the article as well as most of the comments miss the most important difference between the two. Insurance, assuming the fee isn't too high, increases your utility of money while gambling decrease it. If there is an event that happens 1 time in 100 that costs you $100k and you pay $1.05k to insure against that would have a negative expected value in money terms but positive expected value in utility of money te…

Hm I don't follow. Could you please define "expected value in money terms" vs "expected value in utility of money terms"

Utility is quite a complex and badly defined concept - its also central to economics. The idea is that the value to you of an extra amount of money goes down as you have more. i.e. getting £10k could be life changing for a poor person, unnoticeable to a rich one.

https://moneyterms.co.uk/utility/

The expected value is the amount multiplied by the chance of getting it. SO if you have a 50% chance of getting £1,000 the expected value is £500.

That GP comment is saying is that in the case of insurance the small risk of being wiped out financially vs the certain cost of premiums the expected value is negative (for insurers to be profitable) BUT because the effect on utility of losing a huge amount of money is so bad, the expected value of the utility is positive.

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

#197

Post by [deleted] »

mungoman2 wrote: post #186
bluecalm wrote: post #168

I feel the article as well as most of the comments miss the most important difference between the two. Insurance, assuming the fee isn't too high, increases your utility of money while gambling decrease it. If there is an event that happens 1 time in 100 that costs you $100k and you pay $1.05k to insure against that would have a negative expected value in money terms but positive expected value in utility of money te…

Hm I don't follow. Could you please define "expected value in money terms" vs "expected value in utility of money terms"

[deleted]

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

#198

Post by bruce343434 »

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…

The problem is price fixing deals between hospitals and insurers, where the insurer pays only a tiny fraction of the retail price. It's not economically viable for consumers to not have the "discount plan" as you aptly put it. That benefits the insurance company so they like it like that.

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

#199

Post by 2-3-7-43-1807 »

you don't really go broke by having too many insurances - at least that's not very common. but you can go broke by gambling and such become a liability to family and friends. actually it makes more sense to compare gambling to _not_ having an insurance. pretty simple.

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

#200

Post by bruce343434 »

globular-toast wrote: post #193
michaelt wrote: post #171

Earlier quoted context omitted.

> 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…

Bicycle insurance is mostly useless unfortunately. We really need to do something about it if bicycles are going to be practical for more people. Cars get probably 100x the Police resource dedicated to them compared to bikes.

Bikes were not meant to be $1000+. Get a cheap one and set aside a monthly amount for replacing it. Don't get insurance on it. Get into an accident? You should already have health insurance to cover it.
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