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The purpose of insurance is such that individuals share the burden to cover random, life-impacting events. From the consumer side, insurance is the purchase of

The purpose of insurance is such that individuals share the burden to cover random, life-impacting events. From the consumer side, insurance is the purchase of a service to cover any a future debt falling under the category of the service, ie. an unforeseeable, unintentional act of damage by or to the consumer. I have no intention of burning down my house. I pay so that if it were to happen, I am not stuck paying off a house I'll never own. From the servicer side, it is the sale of a product whereby consumers get covered for unexpected events, yet the company gets a profit for provider the service. Assuming a correct amortization, the company gets a profit.

shkkmo 8y ago
So how is that different from hedging your bets? Insurance is gambling. The servicer is the house and always wins (unless they screw up). That is not to say that gambling can't serve purposes other than entertainment, because it can. That doesn't make it not gambling.
- tkxxx7 8y ago
  > So how is that different from hedging your bets? Correct me if I’m wrong, but I think the difference is, no one is betting that you actually do have an unforeseen incident, so there is no bet to hedge against.
  - shkkmo 8y ago
    > I think the difference is, no one is betting that you actually do have an unforeseen incident, You are. When you buy insurance, you are betting that you will have an unforeseen incident and will utilize your insurance. The fact that you are doing so to offset some financial risk doesn't change the fact that you are gambling. I don't see why source of a risk matters here. I believe the position I am arguing against is that that motivation of hedging against risk makes gambling-like behavior not gambling. As far as I can tell your position is: Gambling-like behavior is not gambling if it is done to offset non-gambling related risk.
    - tkxxx7 8y ago
      > You are. When you buy insurance, you are betting that you will have an unforeseen incident and will utilize your insurance. Almost, but I don't feel like this is 100% accurate, because neither involved party wants an unforeseen incident to occur - the 'win' situation, if you could call it that, is the same for both parties. I can sort of see the argument that you are betting you "won't win", but I can't see it as gambling behavior: > I don't see why source of a risk matters here. Gambling implies taking a risk for possible gain, no? To me, part of the difference is that the risk/chance involved (life) is not intrinsic to the transaction - it is more or less known what your returns will be, and under what conditions. Contrast this to, say, a slot machine, where the 'win' conditions are owned by the house and unbeknownst to you. There is no situation where you can know you will be paid out for any given parameters. What about flight insurance? Is that a gamble because no one knows if you'll make your flight? Are you betting that you won't make your flight because you purchased it, or are you paying for a conditional service? (mostly not serious) aside: if what you posit is true, is the peace of mind one gains from having insurance akin to gambling addiction?
      - shkkmo 8y ago
        > To me, part of the difference is that the risk/chance involved (life) is not intrinsic to the transaction - it is more or less known what your returns will be, and under what conditions. It is? I'm pretty sure health care pricing is far more opaque than slot machine payout amounts (the opaqueness of payout rates varies by state). You have increased the downside of not having large hospital bills. You are taking on risk, but the idea is that the small risk reduces the variance in your outcomes. See the other reply thread where I am trying to understand why reducing variance in one situation is gambling but doing it in another is not. > if what you posit is true, is the peace of mind one gains from having insurance akin to gambling addiction? I would say akin, but obviously not the same. In both cases you have made wager that you can be usually pretty certain has a negative expected value and the motivation for this wager is to acquire a positive/pleasant state of mind.
  - drusepth 8y ago
    If you weren't betting that you would have an unforeseen incident (rephrased as: if you were betting you wouldn't have an unforeseen incident), why would you pay anything? Paying $X is saying "I bet something will happen to me, so I need this service so I don't get screwed over." Otherwise, why buy pay anything at all?
- Dylan16807 8y ago
  Hedging is when you act to counteract [part of] a bet. So you're right, insurance is like hedging a bet. Which makes it roughly the opposite of betting, in most uses. (If you "hedge" so far you're unbalanced in the other direction, you're not actually hedging your bets any more. "Hedge funds" aren't really for hedging if you use them as a primary investment.)
  - shkkmo 8y ago
    > Which makes it roughly the opposite of betting, in most uses. In what way is it opposite? How is more betting somehow the opposite of betting? Let's say I bet $10 that team A will beat team B with 1:10 odds (I would win 100) and then team A does really well so at half-time I bet $10 that B will beat team A with 1:2 odds (I would win 20) I have now hedged my bets and I will at least break even. Under your understanding, that second bet is not gambling solely because of my motivation for placing it? Let's say that instead I make a $20 bet at halftime that B will beat team A with 1:2 odds (I would win 40). Now I come out ahead no matter the outcome. Because I "over hedged" this is gambling again? This doesn't make sense to me.
    - Dylan16807 8y ago
      That's complicated because you're changing your bet as the odds move, which is pretty gambly. If you were doing both bets before the game started, at about the same time, then the second bet would effectively not be gambling. Not because of your motivation, exactly, but because it reduces the variance in how much money you'll have at the end of the game. If you buy a matched pair of tickets so that you guarantee a $60 output, that's not gambling. Even if you come out ahead no matter what. (who was dumb enough to sell that to you?) Let's say you had a bet on team A forced upon you, because of where you live or something. At that point buying a matching bet on team B is an anti-gambling behavior that removes variance from the system. It's the equivalent of insurance. If you then keep buying team B, then you're gambling in the other direction. If you buy so much insurance that you make a profit on losing items, you're gambling. But that's not how insurance normally works. It normally pays out less then what you lose, because of deductibles and the time wasted.
- njarboe 8y ago
  Insurance is good. Gambling is bad. How could they be the same thing?

shkkmo 8y ago

So how is that different from hedging your bets? Insurance is gambling. The servicer is the house and always wins (unless they screw up). That is not to say that gambling can't serve purposes other than entertainment, because it can. That doesn't make it not gambling.

tkxxx7 8y ago
> So how is that different from hedging your bets? Correct me if I’m wrong, but I think the difference is, no one is betting that you actually do have an unforeseen incident, so there is no bet to hedge against.
- shkkmo 8y ago
  > I think the difference is, no one is betting that you actually do have an unforeseen incident, You are. When you buy insurance, you are betting that you will have an unforeseen incident and will utilize your insurance. The fact that you are doing so to offset some financial risk doesn't change the fact that you are gambling. I don't see why source of a risk matters here. I believe the position I am arguing against is that that motivation of hedging against risk makes gambling-like behavior not gambling. As far as I can tell your position is: Gambling-like behavior is not gambling if it is done to offset non-gambling related risk.
  - tkxxx7 8y ago
    > You are. When you buy insurance, you are betting that you will have an unforeseen incident and will utilize your insurance. Almost, but I don't feel like this is 100% accurate, because neither involved party wants an unforeseen incident to occur - the 'win' situation, if you could call it that, is the same for both parties. I can sort of see the argument that you are betting you "won't win", but I can't see it as gambling behavior: > I don't see why source of a risk matters here. Gambling implies taking a risk for possible gain, no? To me, part of the difference is that the risk/chance involved (life) is not intrinsic to the transaction - it is more or less known what your returns will be, and under what conditions. Contrast this to, say, a slot machine, where the 'win' conditions are owned by the house and unbeknownst to you. There is no situation where you can know you will be paid out for any given parameters. What about flight insurance? Is that a gamble because no one knows if you'll make your flight? Are you betting that you won't make your flight because you purchased it, or are you paying for a conditional service? (mostly not serious) aside: if what you posit is true, is the peace of mind one gains from having insurance akin to gambling addiction?
    - shkkmo 8y ago
      > To me, part of the difference is that the risk/chance involved (life) is not intrinsic to the transaction - it is more or less known what your returns will be, and under what conditions. It is? I'm pretty sure health care pricing is far more opaque than slot machine payout amounts (the opaqueness of payout rates varies by state). You have increased the downside of not having large hospital bills. You are taking on risk, but the idea is that the small risk reduces the variance in your outcomes. See the other reply thread where I am trying to understand why reducing variance in one situation is gambling but doing it in another is not. > if what you posit is true, is the peace of mind one gains from having insurance akin to gambling addiction? I would say akin, but obviously not the same. In both cases you have made wager that you can be usually pretty certain has a negative expected value and the motivation for this wager is to acquire a positive/pleasant state of mind.
- drusepth 8y ago
  If you weren't betting that you would have an unforeseen incident (rephrased as: if you were betting you wouldn't have an unforeseen incident), why would you pay anything? Paying $X is saying "I bet something will happen to me, so I need this service so I don't get screwed over." Otherwise, why buy pay anything at all?
Dylan16807 8y ago
Hedging is when you act to counteract [part of] a bet. So you're right, insurance is like hedging a bet. Which makes it roughly the opposite of betting, in most uses. (If you "hedge" so far you're unbalanced in the other direction, you're not actually hedging your bets any more. "Hedge funds" aren't really for hedging if you use them as a primary investment.)
- shkkmo 8y ago
  > Which makes it roughly the opposite of betting, in most uses. In what way is it opposite? How is more betting somehow the opposite of betting? Let's say I bet $10 that team A will beat team B with 1:10 odds (I would win 100) and then team A does really well so at half-time I bet $10 that B will beat team A with 1:2 odds (I would win 20) I have now hedged my bets and I will at least break even. Under your understanding, that second bet is not gambling solely because of my motivation for placing it? Let's say that instead I make a $20 bet at halftime that B will beat team A with 1:2 odds (I would win 40). Now I come out ahead no matter the outcome. Because I "over hedged" this is gambling again? This doesn't make sense to me.
  - Dylan16807 8y ago
    That's complicated because you're changing your bet as the odds move, which is pretty gambly. If you were doing both bets before the game started, at about the same time, then the second bet would effectively not be gambling. Not because of your motivation, exactly, but because it reduces the variance in how much money you'll have at the end of the game. If you buy a matched pair of tickets so that you guarantee a $60 output, that's not gambling. Even if you come out ahead no matter what. (who was dumb enough to sell that to you?) Let's say you had a bet on team A forced upon you, because of where you live or something. At that point buying a matching bet on team B is an anti-gambling behavior that removes variance from the system. It's the equivalent of insurance. If you then keep buying team B, then you're gambling in the other direction. If you buy so much insurance that you make a profit on losing items, you're gambling. But that's not how insurance normally works. It normally pays out less then what you lose, because of deductibles and the time wasted.
njarboe 8y ago
Insurance is good. Gambling is bad. How could they be the same thing?