Insurance

[Zeluvia]

This is for FUN..

So, what is the underlying economic theory of Insurance...

Is it communism? From each according to ability to each according to need? Is it socialism? We all pitch in to care for the weak, against a time when we ourselves may be in need?

Or is it really gambling, where the house has stacked the odds in order to profit?

= )

[Pilgrim]

Yes.

[Ryokan]

Its gambling. The insurance company is gambling nothing bad will happen. You are gambling something bad will. Someone wins someone loses. By aggregating enough people together and setting a rate, the insurance company tries to create a situation where the odds are strongly in favor of it winning the bet more often than not. Like a card counter in blackjack. Additionally, there is a time factor, sicne insurance companies invest that money you pay them to try to squeeze out profit that way too.

[Tickle Me Mercury]

It's gambling communism.

Or communist gambling.

Whatever it is, I think we can all agree that HMOs are unholy agents of the beast.

[joel]

This is for FUN..

So, what is the underlying economic theory of Insurance...

Is it communism? From each according to ability to each according to need? Is it socialism? We all pitch in to care for the weak, against a time when we ourselves may be in need?

Or is it really gambling, where the house has stacked the odds in order to profit?

= )

It's like socialism, but where you choose what kind of "safety net" you want, and you voluntarily pay for it.
So 2 factors there:
1) Voluntary--you aren't forced to participate or not. It's based on mutual consent between the two parties.
2) You pay for it--You pay for the safety net you agree upon (as opposed to "society" paying for your safety net)

It's like gambling, but backwards. Playing the lottery, you put in a small amount for the chance to win big.
Playing insurance, you put in a "small" amount to avoid the chance to lose big.

I tend to be in favor of high deductibles--so as not to use insurance as your normal way of paying for something, but to use insurance as a hedge against utter devastation. If you make insurance your normal way of paying for something, then you will lose either way.

[Zeluvia]

Voluntary? Where I live you can't drive without insurance legally, you can't not insure your house in many neighborhoods per neighborhood association rules meant to keep up property values, and if you are living without health insurance (like me) you learn to set that broken thumb yourself = p

[Tickle Me Mercury]

It's like socialism, but where you choose what kind of "safety net" you want, and you voluntarily pay for it.
So 2 factors there:
1) Voluntary--you aren't forced to participate or not. It's based on mutual consent between the two parties.
2) You pay for it--You pay for the safety net you agree upon (as opposed to "society" paying for your safety net)

It's like gambling, but backwards. Playing the lottery, you put in a small amount for the chance to win big.
Playing insurance, you put in a "small" amount to avoid the chance to lose big.

I tend to be in favor of high deductibles--so as not to use insurance as your normal way of paying for something, but to use insurance as a hedge against utter devastation. If you make insurance your normal way of paying for something, then you will lose either way.

Yeah, like Zel, I'm required by law to insure a lot of stuff. It reverses the role of consumer and supplier in the market, to the point where instead of companies looking to provide me with the best value for my money, I have to approach insurance companies with my hat in my hand begging to be insured just so I can drive to work—lest I be pulled over on that one unlucky day and lose my license for a mandatory two years.

[joel]

Voluntary? Where I live you can't drive without insurance legally, you can't not insure your house in many neighborhoods per neighborhood association rules meant to keep up property values, and if you are living without health insurance (like me) you learn to set that broken thumb yourself = p
Yes, my mistake. To the extent that insurance is coerced, it is socialism.