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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)

#71

Post by lostmsu »

Almondsetat wrote: post #23
BugsJustFindMe wrote: post #15

Earlier quoted context omitted.

> 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. Counter: your belief about insurance is inverted from reality because your notion of what constitutes winning vs losing at insurance is backwards. You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually d…

You can choose to live your life without insurance, in which case you have to bear all the damage from bad events but you also benefit fully from good events, or you can live your life with insurance, taking less losses from bad events and getting less from good events. As said, it simply reduces variance in your life/business. You have to choose if that's how you want to live your life.

> You can choose to live your life without insurance

No, in many cases you can't. Health, car, homeowners, and renter's insurances are mandatory until you are wealthy.

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

#72

Post by BugsJustFindMe »

sailfast wrote: post #41
BugsJustFindMe wrote: post #15

Earlier quoted context omitted.

> 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. Counter: your belief about insurance is inverted from reality because your notion of what constitutes winning vs losing at insurance is backwards. You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually d…

Insurance (outside of health insurance, which is not insurance in the typical sense) hedges your "bet" so it's not gambling to me. Your bet is that you'll drive a car without an accident. Insurance hedges that bet to reduce downside risk if there is an accident. You're paying a small amount to avoid a large loss, on purpose, knowing that it may not happen. You're not trying to get more out of it than you put in (at l…

> Your bet is that you'll drive a car without an accident.

That's the ideal outcome, but it is not the bet being made by the person buying insurance. In fact the opposite. If you believed that you wouldn't have an accident you would not buy insurance. You buy insurance because you believe that you will likely have an accident at some point and that the accident will happen either soon enough or seriously enough that the cost of covering the accident will be greater than the total cost of insurance up to that point.

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

#73

Post by seanmcdirmid »

lostmsu wrote: post #71
Almondsetat wrote: post #23

Earlier quoted context omitted.

You can choose to live your life without insurance, in which case you have to bear all the damage from bad events but you also benefit fully from good events, or you can live your life with insurance, taking less losses from bad events and getting less from good events. As said, it simply reduces variance in your life/business. You have to choose if that's how you want to live your life.

> You can choose to live your life without insurance No, in many cases you can't. Health, car, homeowners, and renter's insurances are mandatory until you are wealthy.

Health insurance isn’t mandatory in the USA. It’s a bad idea not to have it though. You might get away without insurance when you are young, however, assuming nothing bad happens. Without being able to price discriminate on pre-existing conditions, however, it’s not really free market insurance anymore.

Liability Car insurance is mandatory only if you use public roads, which most people do. Collision insurance is only needed if you have a bank loan. Homeowner’s insurance is needed for a mortgage, renter insurance is required by a landlord. You can avoid most of these insurances if you are really rich, but most rich people carry even more insurance because they have more to lose, so they will have umbrella policies, for example.

Ironically, it’s the really poor who can get out of having insurance: many states aren’t going to throw you in jail if you drive without a license or insurance, so now other people need uninsured driver insurance. Heck, it’s way too common where I live that many people have no insurance, even if our state requires really low levels of coverage. Health insurance is only needed if you have assets the hospital can sue for, but you will be going to the ER for everything so that sucks.

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

#74

Post by [deleted] »

BugsJustFindMe wrote: post #15
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 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. Counter: your belief about insurance is inverted from reality because your notion of what constitutes winning vs losing at insurance is backwards. You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually d…

[deleted]

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

#75

Post by brightlancer »

BugsJustFindMe wrote: post #57
pdonis wrote: post #42

Earlier quoted context omitted.

> You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually do something for you. You are misunderstanding what insurance is for. The benefit that insurance conveys for the person insured is not that it is supposed to make money. It is risk avoidance. Without insurance, you might pay zero, or you might pay a very large sum that you can't afford. With insuran…

> The benefit that insurance conveys for the person insured is not that it is supposed to make money. Presuming you mean ending with more money than you started, gambling isn't either. Pay in vs pay out has no relation whatsoever to that except in passing. > It is risk avoidance. These are the same thing dressed in different names. There's only no making money on health insurance in the sense that you don't get to ke…

> There's only no making money on health insurance

Health "insurance" is mostly not insurance: it's a healthcare plan for periodic maintenance and minor incidents combined with an insurance plan for large and catastrophic incidences.

When I buy car insurance, they don't give me 4 free (or even discounted) oil changes a year. Car insurance exists for large and catastrophic incidences. Same with home insurance.

Actual health _insurance_ plans are much cheaper than healthcare plans, but they also only cover large and catastrophic incidences.

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

#76

Post by brightlancer »

Before we delve into everything else...

> Risk-sharing mutual aid societies are now among the largest and best-funded organisations on the planet - we call them "governments".

I'm not aware of any mutual aid society that shot an unarmed man SEVEN TIMES IN THE HEAD because they misidentified him. The Metropolitan Police did, and none of the officers were disciplined.

https://en.wikipedia.org/wiki/Shooting_of_Jean_Charles_de_Me...

That right there is a great example of the bias of the BBC.

----

The article is engaging but doesn't give a good explanation of the difference between "insurance" and "gambling".

At the very end it brings up financial derivatives but again does not explain them well or the danger they caused.

Is "insurance" a type of "gambling"? Maybe. But it's quite different from gambling in a US casino (and I presume UK casino).

In the US, "gambling" refers to wagers placed at known odds, sometimes against other players; legal gambling has limitations on how much money the House can take: e.g. if a casino "wins" $100, they must also pay $80 to someone.

Again in the US, "insurance" (excepting health "insurance", which is mostly not insurance) is someone paying a regular premium and the insurer promising to pay if certain events happening to the person, with the government requiring that the insurer keep financial reserves to pay out claims. If you stop paying your premiums, you lose your insurance. If the insured events never happen, the insurer keeps your money.

In a sense, insurance is a type of gambling, but closer to buying an umbrella in the morning in case it rains in the afternoon.

Financial derivatives were portrayed as insurance but were not regulated as such, and the banks did not keep reserves to pay them out; because folks were also taking "insurance" against events that happened to third-parties (i.e. not themselves) it looks a lot like gambling (though they weren't regulated as that, either).

I highly recommend the film "The Big Short" to explain the 2008 financial crisis in fairly plain terms. (I finally picked up the book but it's in the queue on my shelf.)

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

#79

Post by pdonis »

jethro_tell wrote: post #69
pdonis wrote: post #62

Earlier quoted context omitted.

> being sold something like health insurance as hedging risk is bullshit. More precisely, what is now called "health insurance" in countries like the US is mostly not insurance, because it does not involve costly, rare, unpredictable events, which are the kinds of events that are insurable risks. What should happen is that those kinds of things (for example, insurance against injuries in accidents) should be separate…

To be fair, accidents and large health issues are relatively predictable in any population. What makes health insurance particularly predatory, is the attempt to carve around segments of the population to make money in something that everyone needs. Almost all accident insurance could be grouped under occupational and transportation related insurance. The remaining accident insurance would be insanely small across al…

> accidents and large health issues are relatively predictable in any population.

Yes, which makes insurance feasible for such things to the extent that they are rare and unpredictable for particular individuals. (Note that many "large health issues" are not necessarily unpredictable for particular individuals.)

> What makes health insurance particularly predatory, is the attempt to carve around segments of the population to make money in something that everyone needs.

I think the biggest problem is what I said before, that what we call "health insurance" actually includes many things that are not insurance and should not be sold as insurance. If we remove the things that should not be insurance in the first place, I agree that what's left over should be feasible to handle using ordinary insurance practices as is done in other areas.

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

#80

Post by rundmc »

anonbanker wrote: post #35

If you know what a Tontine[1] is, you'll understand there really is no difference between Insurance and Gambling. 1. https://en.wikipedia.org/wiki/Tontine

Well insurance is in case something you don't want happens (die young) whereas a tontine is in case something you do want (live long) happens.

I'd call that a major difference but then again I'm biased.

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