4 ms·

If insurance was cost effective in the long run, insurance companies wouldn't be profitable

• tehjoker 6y ago
  Insurance schemes do not have to be run for a profit. It's not a law of nature.
• Nasrudith 6y ago
  That is only true in a zero sum system. If insurance can get say 3% profit margin but allows for others to take a riskier approach which overall produces 7% more profit by allowing slimmer margins both can profit. There are risks to that sort of leverage for both parties, especially in black swan events. It is akin to loans essentially - the one taking them may be giving profits to others but that doesn't mean it isn't cost effective.
• ska 6y ago
  You aren't protecting against the expected value though, you are protecting against variance.
  • mkoubaa 6y ago
    No argument there