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It's clear evidence that the insurance industry is based on risk assessment and probabilities. Of course it is the same as gambling, except that the "game" is n
by rswail 6y ago
It's clear evidence that the insurance industry is based on risk assessment and probabilities. Of course it is the same as gambling, except that the "game" is not necessarily biased in either direction.
Actuaries spend their careers making these bets. That's why no insurance company will take a policy on a "sure thing".
If she had taken on a similar bet in a market where insurance policies were bundled and sold, instead of a "credit default swap" you'd have a "on-time default swap" and it would be completely legal.
But there isn't such a market, so she effectively made one for herself by using false identities and the arbitrage of being able to pick and choose when she would take her side of the swap.
- NullPrefix 6y ago>except that the "game" is not necessarily biased in either direction Such a bold statement
- deleted 6y ago[deleted]
- viraptor 6y ago> except that the "game" is not necessarily biased in either direction. The insurance industry wouldn't exist if that was true. The whole profit there comes from the bias for the insurer.
- throwawaygh 6y agoLarge insurance companies have ten figure net incomes on top of paying out lavish executive salaries, paying out dividends, etc. But the game isn't biased. Right.
- user5994461 6y agoUntil there is a tornado or a flood then they have to pay 11 figures to cover damages.
- throwawaygh 6y agoa) that's what reinsurance is for. b) Can you give some specific examples? I'm using State Farm as a place-holder for "large insurance company". They had one really bad year recently where they "only" made 9 figures in net income. Insurance companies are extremely profitable. Their losses in bad years are more than offset by gains in good years.
- user5994461 6y agoYou're from the US? US is all about profits so that makes sense. Property insurance don't even have to compensate against flood and usual risks which is stupid IMO. In other locations, insurances are not all about profit and reinsurance. Either they're public operated by the government, or they're private and have caps on how much they can charge compared to how much they return and they don't get to choose what they can cover or not. I am pretty sure my last insurance was directly financing the government. I suppose it makes sense to store billions of euros long term (until a disaster) into dedicated government bonds, which benefits both the government and the company. That is to say, the money fits a larger purpose in the meantime, it's not all evil.
- throwawaygh 6y agoYes, specific to the US. That's fair :)