4 ms·

You're right in some particulars, both gambling and insurance let customers enter transactions with an uncertain payoff that favors the house, and both are rela

You're right in some particulars, both gambling and insurance let customers enter transactions with an uncertain payoff that favors the house, and both are relatively aggressive legally when customers try to get an edge. But the purpose of healthy gambling is to have fun, and the purpose of insurance is to pay a small amount in most future states of the world to avoid very bad outcomes in some future states of the world. These are both reasonable things to spend money on, but they're very different objectives.

MaxBarraclough 6y ago
Agreed. Insurance will always look somewhat like gambling, by its very definition, but its role is very different. Someone did a better job of estimating odds than an insurance company did. They then defrauded the insurance company, using fake identities, and were discovered and arrested. This doesn't delegitimise the idea of insurance in the slightest. If the person hadn't used false identities, but had still been arrested, that would be a more interesting case (more analogous to legal professional gambling). When false identities are used, it's clearly not above board. I would assume that in such a case, the insurance company could refer to their terms-and-conditions, and then contest their obligation to pay out. I don't imagine it would be a criminal matter though. (Needless to say I'm not a lawyer.)
- chii 6y ago
  > Someone did a better job of estimating odds than an insurance company did. They then defrauded the insurance company how come it's not fraud when insurance companies calculate the odds better than you, and yet it is fraud when you do it to the insurance companies?
  - ascorbic 6y ago
    Because you're not buying it to win money. You're buying it to limit downside loss, because aside from the massively wealthy, we are loss averse. It's worth our while to pay $200 to insure against a 1% chance of losing $10000, even though in purely probabilistic terms that's a bad deal, because most people can't afford an unexpected expense that large. Even people who can afford that, it's still more painful to lose it than to have a 99% chance of having wasted $100. The larger the potential downside, the bigger the incentive to insure against it, even when it's a bad deal.
    - Supermancho 6y ago
      > Because you're not buying it to win money. There is no win or lose, if insurance is not gambling. If it is, then either side wins money with varying payout schedules.
  - foota 6y ago
    It's not. It's fraud when you lie about it.
- saalweachter 6y ago
  > Someone did a better job of estimating odds than an insurance company did. Eh, I'm not sure that's really true, even. Flight insurance -- at least, all of the flight insurance I'm familiar with -- is a fixed-cost product. I doubt it is so much that the insurance company couldn't create separate risk pools, from their own analysis, but that it doesn't make sense as a business.

MaxBarraclough 6y ago

Agreed. Insurance will always look somewhat like gambling, by its very definition, but its role is very different. Someone did a better job of estimating odds than an insurance company did. They then defrauded the insurance company, using fake identities, and were discovered and arrested. This doesn't delegitimise the idea of insurance in the slightest. If the person hadn't used false identities, but had still been arrested, that would be a more interesting case (more analogous to legal professional gambling). When false identities are used, it's clearly not above board. I would assume that in such a case, the insurance company could refer to their terms-and-conditions, and then contest their obligation to pay out. I don't imagine it would be a criminal matter though. (Needless to say I'm not a lawyer.)

chii 6y ago
> Someone did a better job of estimating odds than an insurance company did. They then defrauded the insurance company how come it's not fraud when insurance companies calculate the odds better than you, and yet it is fraud when you do it to the insurance companies?
- ascorbic 6y ago
  Because you're not buying it to win money. You're buying it to limit downside loss, because aside from the massively wealthy, we are loss averse. It's worth our while to pay $200 to insure against a 1% chance of losing $10000, even though in purely probabilistic terms that's a bad deal, because most people can't afford an unexpected expense that large. Even people who can afford that, it's still more painful to lose it than to have a 99% chance of having wasted $100. The larger the potential downside, the bigger the incentive to insure against it, even when it's a bad deal.
  - Supermancho 6y ago
    > Because you're not buying it to win money. There is no win or lose, if insurance is not gambling. If it is, then either side wins money with varying payout schedules.
- foota 6y ago
  It's not. It's fraud when you lie about it.
saalweachter 6y ago
> Someone did a better job of estimating odds than an insurance company did. Eh, I'm not sure that's really true, even. Flight insurance -- at least, all of the flight insurance I'm familiar with -- is a fixed-cost product. I doubt it is so much that the insurance company couldn't create separate risk pools, from their own analysis, but that it doesn't make sense as a business.