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Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact

Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, allows you move your odds from the ends of the bell curve towards the center. If you win, you win a bit less because you have to take into account the Insurance money you spent. If you lose, you lose less because the insurance premiums will kick in. Basically, insurance is a PID controller.

from-nibly 2y ago
First off thats just reinforcing the grayness of the difference. Where exactly on which exact bell curve does gambling stop and insurance start? Second, the one thats even more ambiguous is insurance from the perspective of the insurer. It's just gambling with a payment plan, that HOPEFULLY doesn't turn into a ponzi scheme.
- bee_rider 2y ago
  I think they are on different sides of 50% probability. Insurance helps mitigate a low-probability risk. Gambling provides a low-probability chance of a big reward. Socially the presence of a small number of really destitute people is a problem, so we moralize the process to prevent it as “bad.” The presence of a small number of really rich people is, like, neutral or negative, so we don’t moralize the a thing they produces them as good. It is a bit weird that we don’t moralize the rich as good in this case, given that we often do do that. Not sure what’s up there. Maybe gambling is uncomfortable because produces rich that aren’t seen as deserving somehow.
  - elijaht 2y ago
    > I think they are on different sides of 50% probability. Insurance helps mitigate a low-probability risk. Gambling provides a low-probability chance of a big reward. Trivially not true- I can wager on a heavy favorite to win at very low payouts
- Almondsetat 2y ago
  >Where exactly on which exact bell curve does gambling stop and insurance start? I don't think it has to come from me that the world isn't black and white. >It's just gambling with a payment plan If it's all so gray, why couldn't you say "gambling is just a riskier insurance" then? You only consider one of the two possible directions, namely the one that puts insurance under a bad light.
- pdonis 2y ago
  > Where exactly on which exact bell curve does gambling stop and insurance start? That's not the difference. The difference is that in gambling, you accept a large variance in payoff, whereas in insurance, you don't; you transfer that risk to someone else.
  - adw 2y ago
    In gambling you pay someone to take risk for you. In insurance you pay someone to take risk for you. They are the same tool; we just give it a different name when we’re hedging from when we’re speculating.
    - pdonis 2y ago
      > In gambling you pay someone to take risk for you. No, you don't, you take the risk yourself. You're certainly not paying the casino to take risks for you; you're paying them for the privilege of you taking risks (and losing on average) by playing their games.
      - adw 2y ago
        You’re paying them to take the higher variance end of a swap. That is exactly the same transaction as insurance, complete with the same pricing model.
- deleted 2y ago
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- sdwr 2y ago
  There's no bell curve. Insurance is hedging against the value of something you have an interest in (which takes the form of a bet against that thing). Gambling is betting on a thing. So a short option on a stock (betting against it) would be: a) insurance if taken out by the company, or a shareholder, or someone with stake in the business b) gambling if done by a random third party There's a moral component to the definition.
  - kortilla 2y ago
    There’s nothing moral. It’s gambling either way. The only confusion comes from people who bend over backwards to convince themselves they aren’t gambling because of weird “it’s a sin” morals that leak into their mind. Betting against a company by shorting has no different moral component than betting on a company by investing. Either way you aren’t doing work and are taking risk to get a higher return. Insurance products have different risk curves but they are still gambling. Someone can buy a ton of garbage houses, buy bunch of insurance, and just hope they burn down for the payout.
NegativeK 2y ago
> Gambling is all about risking it all. There are also plenty of people who can maintain control of their finances in the face of internal gambling biases and manipulation from the other parties (like casinos.) I don't gamble, but I do believe that most gamblers are in the middle of the extremes. You could overcommit to insurance products/premiums, but I think there's more regulation there and less of an addictive aspect -- which is why we don't really hear about it.
- Almondsetat 2y ago
  "Risking it all" was not referring to being a gambling addict. It simply meant that if you put 10k on black and the ball goes on red, you lose all of the 10k
  - xp84 2y ago
    Same as if I buy a 10-year term life insurance policy and don't die during that decade. I lost all of the full premium paid.
    - Almondsetat 2y ago
      You will live those 10 years with more peace of mind, which is the only reason to have life insurance since once you're dead you're dead
      - kortilla 2y ago
        Peace of mind isn’t the reason. It’s leaving family stuff because you care about them.
    - klyrs 2y ago
      No, the cost of a "jackpot" in life insurance is the premium plus literal life or limb. Only looking at the premium is penny wise, pound foolish. If you don't have the insurance and you die, your estate is out a million dollars because you skimped a few thousand.
BugsJustFindMe 2y ago
> Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. Counter: your belief about insurance is inverted from reality because your notion of what constitutes winning vs losing at insurance is backwards. You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually do something for you. Dying is losing at life, but it's winning at life insurance. Buying insurance is very literally betting that something expensive/bad will happen sooner rather than later or never, where the expected payout exceeds the expected cost to you. Selling insurance is betting the opposite, while, exactly like a casino, making sure that the sum of inflow stays greater than the sum of outflow. > Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that This ignores the fact that many (most?) personal insurances are paid over and over and over and over again, because when you stop paying they stop paying too, and they all always cost more than they expect to pay. Every month you pay for health insurance and you don't get sick, that amount you spent is lost. Every time you insure an electrical appliance that doesn't break, the money you spent is lost. This is exactly like any other gambling loss. You gloss over that part by saying "but you have your health and that's good", which is absolutely true, but perversely not what you paid for.
- Almondsetat 2y ago
  You can choose to live your life without insurance, in which case you have to bear all the damage from bad events but you also benefit fully from good events, or you can live your life with insurance, taking less losses from bad events and getting less from good events. As said, it simply reduces variance in your life/business. You have to choose if that's how you want to live your life.
  - BugsJustFindMe 2y ago
    > it simply reduces variance Mostly I agree. That doesn't make it not gambling though.
DaveExeter 2y ago
I would express it differently. With insurance, you are guarantee to lose. To insure against a 10K risk, you have to pay 20K. 50% of your premium goes towards staff, advertising, profit, etc. But you reduce variance.
- Almondsetat 2y ago
  >But you reduce variance. Yes, and turns out that having more consistent results is what keeps the economy going. Also, the only reason gambling exist is because you are guaranteed to lose. The house always wins, statistically.
- scaredginger 2y ago
  That's not how I'd express it either. Insurance is a positive EV bet on a log-utility basis
- pdonis 2y ago
  > With insurance, you are guarantee to lose. No, you're not. There is no guarantee that your payout on a claim will be less than the value of the premiums you paid in at the time you make the claim. Averaged over all people being insured, that will be true, but you are just one person, not the average of all people. > To insure against a 10K risk, you have to pay 20K. No, to insure against a 10K risk, you pay some much smaller premium periodically over time. There is nothing that says you must have paid in 20K in premiums before the insurance company will pay out 10K on a claim by you. The insurance company is insuring a huge number of people; all they care about is the average result, not the single result in your individual case. Also, all the above assumes that only monetary value matters to you. But monetary value alone is not why most people buy insurance. Most people buy insurance for risk avoidance, i.e., peace of mind. They want to transfer the risk of having to make a large payout if something bad happens to someone else who can better afford it. That is a thing of value to many people, which is why they are willing to pay for it.
  - kortilla 2y ago
    > No, you're not. There is no guarantee that your payout on a claim will be less than the value of the premiums you paid in at the time you make the claim. With insurance it’s very difficult to get more than the market value out of the destroyed thing on payout. Even if you ignore premiums you’re usually just breaking even. This isn’t a law but it’s something insurance companies wised up to pretty quickly because the incentives get pretty attractive to commit insurance fraud when there is profit involved.
nhggfu 2y ago
"Gambling is all about risking it all" a blanket statement which is not true. gambling is about risk / reward management. there are bad gamblers and good gamblers. a good poker player for example employs bankroll management to avoid going broke due to variance (expected downswings) [1] and their game-play decisions are driven by math. [1] https://www.primedope.com/poker-variance-calculator/ https://www.primedope.com/poker-variance-calculator/
yamrzou 2y ago
Insurance companies are like casinos: Playing at a casino, I’m almost guaranteed to lose money (unless I’m a very good poker player — the house and I can both win there); if I’m lucky, I can win big. If I buy insurance, I’m almost guaranteed to lose money; if I’m unlucky, I can get reimbursed for losses. From: The House Always Wins — Casinos and Insurance Companies — https://kriswilliams.medium.com/the-house-always-wins-casinos-and-insurance-companies-3e177be7a79b https://kriswilliams.medium.com/the-house-always-wins-casino...
- Almondsetat 2y ago
  Yes, you always lose a bit of money with insurance, but life isn't all about money, whereas the whole point of gambling is winning money. Insurance brings other benefits that improve your life.
  - yamrzou 2y ago
    > Insurance brings other benefits that improve your life. What other benefits besides the money that covers the losses?
    - gmane 2y ago
      Hedging risk. This is often a hard concept for people to grasp: there is value to hedging risk. It (generally) cannot be turned into money. There is extrinsic value to reducing risk.
      - lucianbr 2y ago
        But you are only able to hedge the money part of the risk. Life insurance does not bring anyone back, and health insurance only repairs your health as much as can be done with money. You can't insure against incurable diseases, as in the risk remains. You will just get some money to hopefully feel better, or for your children. Same with insuring some painting let's say. You can get enough money to buy a different painting, but the risk of losing that particular painting is still there. If it is a unique painting and it gets lost, how are they going to repair the non-monetary value of it? They can't. Hedging the risk of being shot by wearing armour sounds like actual hedging. Buying insurance against being shot sounds like just betting. The non-money part is exactly the difference, and it is missing in insurance.
instagib 2y ago
There is also the combination of self insuring. 0 An old boss had a dozen kids and his own personal business so he self insured his fleet as well as all the of age kids as employees. Gambling isn't about risking it all as some bets are safer than others for less rewards. 0. https://www.policygenius.com/auto-insurance/what-is-self-insured-car-insurance/ https://www.policygenius.com/auto-insurance/what-is-self-ins...
pdonis 2y ago
> Gambling is all about risking it all. I would say that gambling is about paying for entertainment, much like lotteries. Your overall expectation is that you will lose money, but the entertainment value of being able to imagine yourself winning a huge pot compensates for that. Of course the above assumes that you can afford to lose the amount of money you are gambling. The few times in my life I have gambled, that was always my approach: I set aside an amount I was willing to lose all of, and if I got to the point where it was gone, I stopped. But of course many people who gamble do not take that approach.
beloch 2y ago
Having insurance is gambling, but not having insurance is also gambling. This is because life itself is a gamble. We don't know what the future holds and we have the choice to insure or gamble on just about any aspect of our lives. Insurance companies are just like casinos in that the math always favours them if you look at a sufficiently large sample size. Even so, some things are still worth insuring. e.g. Your house. Most people do not have enough assets saved up to replace their house should it burn down. Even though your house will likely not burn down, protecting yourself against the loss of something you can't easily afford to replace is worth spending money on. Does it make sense to insure things you can replace though? Consider the "Instant product replacement" plans that stores constantly try to sell you. If your monitor dies you can easily absorb the cost of buying a new one. If, instead of buying IPR's on everything, you set aside a similar amount of money, you'll likely soon come out far ahead. Even if you don't, you'll still be able to afford it. Buying IPR's means, on average, you lose money. Not buying IPR's means, on average, you'll save money. The choice is easy. Insure the big, vital things you can't afford to replace. Treat insuring small things as gambling without the fun.
- beefnugs 2y ago
  What about the gamble that the whole thing is a scam from the beginning? If they are going to fight tooth and nail to never payout anyway its all insanity. Also how could insurance ever be a "for profit" business? That could never work. Profit means straight up planning scam right from the beginning, hoping that a big enough payout triggers business failure and you dont have to pay out anyone, yippee free and clear rug pull
  - ghufran_syed 2y ago
    I think thats why states usually regulate the industry
  - hattmall 2y ago
    >Also how could insurance ever be a "for profit" business? What? They plan to take in more in premiums than they pay out in claims by managing risks and underwriting. In that sense it's like a bookmaker who plans to set a line on a game that results in bets not having an imbalance that outweighs their vigorish. In cases where they do they lay off bets on other bookmakers. It's why they tend to be concentrated on certain areas and the same is true for insurance. Both of those are legitimate for profit businesses that use statistical modeling and risk management to turn profits and provide value to customers.
richrichie 2y ago
Both are lottery tickets if viewed from a pure financial contract perspective. Utility of a particular contract to a buyer is subjective.
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randomdata 2y ago
In other words, insurance is gambling's antidote. Gambling takes on a risk, insurance hedges against the risk taken. But if gambling is wrong – implying you shouldn't do it – what do you need insurance for? If you never gamble, you don't need to hedge the gamble. If gambling is wrong, then insurance must also be wrong by association. Perhaps it is not gambling that is wrong, but rather gambling for the sake of entertainment? That would have no doubt been seen as a diminishment of hard work under Protestant eyes. In other words, farming would have been seen as okay because it requires hard work, done for a purpose. A casino game, on the other hand, would not be acceptable as someone may gain (over and above the fun value) while having fun.
sholladay 2y ago
So far, I have made use of my car insurance policy two times. Each time I regretted it. First was for a rodent that somehow got into the space between the roof and the headliner, then died and made a mess. The second was for hitting a pothole at highway speed, which damaged a wheel and its control arm. In both cases, the insurance company paid the minimum they had to. For the rodent, sure they paid for the ceiling to be disassembled, fixed up, and reassembled. But did they pay for the interior detail that was necessary because of the rodent guts that had dripped from the ceiling? No, of course not. For the pothole, they paid for the wheel and control arm replacement and even one new tire. But did they help me pay for a tire on the other side so the wear could be reasonably symmetrical? No, of course not. How about the alignment I obviously got, which isn’t strictly necessary but really should be done after such an incident and installing a new drive wheel? No, of course not. Oh and they categorically consider hitting a pothole to be the driver’s fault, no matter the circumstances, so they raised the insurance premium on me. They made all of their money back within 18 months and now I’m still paying the higher rate. Insurance is such a scam. The company makes a profit despite their team of employees because they always price the premium above your level of risk. If the math made any sense for the customer, the company would break even or go bankrupt. I wouldn’t have insurance but it’s required in my state. The one good thing I can say about it is it helps ensure victims of car accidents get their medical bills paid for regardless of the financial status of the driver.
- majormajor 2y ago
  > I wouldn’t have insurance but it’s required in my state. Does your state require comprehensive/collision insurance? I've only lived places where you would be permitted to get liability-only insurance which would specifically not cover either of the situations you think you got screwed on. (Neither of which is why most people get insurance anyway. You get car-insurance beyond the legal minimum because while you will likely pay more in the long run, you won't have to deal with a surprise tens-of-thousands replacement bill out of nowhere if you accidentally total your car. Or because you have a loan and your lender doesn't trust you to go without it - of course, if you truly don't need insurance for something, you likely don't need a loan for it either. This is generally non-controversial and the "obviously it's a bad deal because the insurance company exists and pays salaries" hot take is... duh? well known? not an insight?)
Zanni 2y ago
Insurance—decrease variance. Gambling—increase variance.
thephyber 2y ago
This is mostly wrong. Gambling doesn’t require that you “risk it all”. In this way, your entire post looks like it’s arguing against a straw man. There is a way to gamble in which it is very similar to insurance — extremely defensive and conservative. But that means the gambler isn’t “enjoying” gambling, they are instead just being an accountant, but not earning a salary for it. They are both games of chance, but you fail to point out why gambling is most frequently outlawed: it is a compulsive behavior that becomes addictive in some people. When 11% of a society can’t maintain a gainful living (maybe they can’t hold a job or they become a habitual liar or a thief to feed their habit), governments tend to step in to dissuade the problematic behavior. But most people who gamble frequently tend to do it with their lizard brain and most people who purchase insurance do it with their cognitive brain (even if the underlying reasons aren’t based on facts). Then again, the premise of the question is arguably wrong. The state lottery is one of the biggest forms of gambling and that isn’t illegal (even though the origins were to supplant similar mob-run games).
JeffL 2y ago
Insurance for the consumer is lowering your expected value to reduce variance. Gambling for the consumer is lowering your expected value to increase variance. The profit and operating costs for both casinos and insurance companies is the lost EV of their patrons.
ossobuco 2y ago
You can approach gambling in the same exact way. It's called hedging your bets.
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from-nibly 2y ago

First off thats just reinforcing the grayness of the difference. Where exactly on which exact bell curve does gambling stop and insurance start? Second, the one thats even more ambiguous is insurance from the perspective of the insurer. It's just gambling with a payment plan, that HOPEFULLY doesn't turn into a ponzi scheme.

bee_rider 2y ago
I think they are on different sides of 50% probability. Insurance helps mitigate a low-probability risk. Gambling provides a low-probability chance of a big reward. Socially the presence of a small number of really destitute people is a problem, so we moralize the process to prevent it as “bad.” The presence of a small number of really rich people is, like, neutral or negative, so we don’t moralize the a thing they produces them as good. It is a bit weird that we don’t moralize the rich as good in this case, given that we often do do that. Not sure what’s up there. Maybe gambling is uncomfortable because produces rich that aren’t seen as deserving somehow.
- elijaht 2y ago
  > I think they are on different sides of 50% probability. Insurance helps mitigate a low-probability risk. Gambling provides a low-probability chance of a big reward. Trivially not true- I can wager on a heavy favorite to win at very low payouts
Almondsetat 2y ago
>Where exactly on which exact bell curve does gambling stop and insurance start? I don't think it has to come from me that the world isn't black and white. >It's just gambling with a payment plan If it's all so gray, why couldn't you say "gambling is just a riskier insurance" then? You only consider one of the two possible directions, namely the one that puts insurance under a bad light.
pdonis 2y ago
> Where exactly on which exact bell curve does gambling stop and insurance start? That's not the difference. The difference is that in gambling, you accept a large variance in payoff, whereas in insurance, you don't; you transfer that risk to someone else.
- adw 2y ago
  In gambling you pay someone to take risk for you. In insurance you pay someone to take risk for you. They are the same tool; we just give it a different name when we’re hedging from when we’re speculating.
  - pdonis 2y ago
    > In gambling you pay someone to take risk for you. No, you don't, you take the risk yourself. You're certainly not paying the casino to take risks for you; you're paying them for the privilege of you taking risks (and losing on average) by playing their games.
    - adw 2y ago
      You’re paying them to take the higher variance end of a swap. That is exactly the same transaction as insurance, complete with the same pricing model.
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sdwr 2y ago
There's no bell curve. Insurance is hedging against the value of something you have an interest in (which takes the form of a bet against that thing). Gambling is betting on a thing. So a short option on a stock (betting against it) would be: a) insurance if taken out by the company, or a shareholder, or someone with stake in the business b) gambling if done by a random third party There's a moral component to the definition.
- kortilla 2y ago
  There’s nothing moral. It’s gambling either way. The only confusion comes from people who bend over backwards to convince themselves they aren’t gambling because of weird “it’s a sin” morals that leak into their mind. Betting against a company by shorting has no different moral component than betting on a company by investing. Either way you aren’t doing work and are taking risk to get a higher return. Insurance products have different risk curves but they are still gambling. Someone can buy a ton of garbage houses, buy bunch of insurance, and just hope they burn down for the payout.

NegativeK 2y ago

> Gambling is all about risking it all. There are also plenty of people who can maintain control of their finances in the face of internal gambling biases and manipulation from the other parties (like casinos.) I don't gamble, but I do believe that most gamblers are in the middle of the extremes. You could overcommit to insurance products/premiums, but I think there's more regulation there and less of an addictive aspect -- which is why we don't really hear about it.

Almondsetat 2y ago
"Risking it all" was not referring to being a gambling addict. It simply meant that if you put 10k on black and the ball goes on red, you lose all of the 10k
- xp84 2y ago
  Same as if I buy a 10-year term life insurance policy and don't die during that decade. I lost all of the full premium paid.
  - Almondsetat 2y ago
    You will live those 10 years with more peace of mind, which is the only reason to have life insurance since once you're dead you're dead
    - kortilla 2y ago
      Peace of mind isn’t the reason. It’s leaving family stuff because you care about them.
  - klyrs 2y ago
    No, the cost of a "jackpot" in life insurance is the premium plus literal life or limb. Only looking at the premium is penny wise, pound foolish. If you don't have the insurance and you die, your estate is out a million dollars because you skimped a few thousand.

BugsJustFindMe 2y ago

> Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. Counter: your belief about insurance is inverted from reality because your notion of what constitutes winning vs losing at insurance is backwards. You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually do something for you. Dying is losing at life, but it's winning at life insurance. Buying insurance is very literally betting that something expensive/bad will happen sooner rather than later or never, where the expected payout exceeds the expected cost to you. Selling insurance is betting the opposite, while, exactly like a casino, making sure that the sum of inflow stays greater than the sum of outflow. > Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that This ignores the fact that many (most?) personal insurances are paid over and over and over and over again, because when you stop paying they stop paying too, and they all always cost more than they expect to pay. Every month you pay for health insurance and you don't get sick, that amount you spent is lost. Every time you insure an electrical appliance that doesn't break, the money you spent is lost. This is exactly like any other gambling loss. You gloss over that part by saying "but you have your health and that's good", which is absolutely true, but perversely not what you paid for.

Almondsetat 2y ago
You can choose to live your life without insurance, in which case you have to bear all the damage from bad events but you also benefit fully from good events, or you can live your life with insurance, taking less losses from bad events and getting less from good events. As said, it simply reduces variance in your life/business. You have to choose if that's how you want to live your life.
- BugsJustFindMe 2y ago
  > it simply reduces variance Mostly I agree. That doesn't make it not gambling though.

DaveExeter 2y ago

I would express it differently. With insurance, you are guarantee to lose. To insure against a 10K risk, you have to pay 20K. 50% of your premium goes towards staff, advertising, profit, etc. But you reduce variance.

Almondsetat 2y ago
>But you reduce variance. Yes, and turns out that having more consistent results is what keeps the economy going. Also, the only reason gambling exist is because you are guaranteed to lose. The house always wins, statistically.
scaredginger 2y ago
That's not how I'd express it either. Insurance is a positive EV bet on a log-utility basis
pdonis 2y ago
> With insurance, you are guarantee to lose. No, you're not. There is no guarantee that your payout on a claim will be less than the value of the premiums you paid in at the time you make the claim. Averaged over all people being insured, that will be true, but you are just one person, not the average of all people. > To insure against a 10K risk, you have to pay 20K. No, to insure against a 10K risk, you pay some much smaller premium periodically over time. There is nothing that says you must have paid in 20K in premiums before the insurance company will pay out 10K on a claim by you. The insurance company is insuring a huge number of people; all they care about is the average result, not the single result in your individual case. Also, all the above assumes that only monetary value matters to you. But monetary value alone is not why most people buy insurance. Most people buy insurance for risk avoidance, i.e., peace of mind. They want to transfer the risk of having to make a large payout if something bad happens to someone else who can better afford it. That is a thing of value to many people, which is why they are willing to pay for it.
- kortilla 2y ago
  > No, you're not. There is no guarantee that your payout on a claim will be less than the value of the premiums you paid in at the time you make the claim. With insurance it’s very difficult to get more than the market value out of the destroyed thing on payout. Even if you ignore premiums you’re usually just breaking even. This isn’t a law but it’s something insurance companies wised up to pretty quickly because the incentives get pretty attractive to commit insurance fraud when there is profit involved.

nhggfu 2y ago

"Gambling is all about risking it all" a blanket statement which is not true. gambling is about risk / reward management. there are bad gamblers and good gamblers. a good poker player for example employs bankroll management to avoid going broke due to variance (expected downswings) [1] and their game-play decisions are driven by math. [1] https://www.primedope.com/poker-variance-calculator/ https://www.primedope.com/poker-variance-calculator/

yamrzou 2y ago

Insurance companies are like casinos: Playing at a casino, I’m almost guaranteed to lose money (unless I’m a very good poker player — the house and I can both win there); if I’m lucky, I can win big. If I buy insurance, I’m almost guaranteed to lose money; if I’m unlucky, I can get reimbursed for losses. From: The House Always Wins — Casinos and Insurance Companies — https://kriswilliams.medium.com/the-house-always-wins-casinos-and-insurance-companies-3e177be7a79b https://kriswilliams.medium.com/the-house-always-wins-casino...

Almondsetat 2y ago
Yes, you always lose a bit of money with insurance, but life isn't all about money, whereas the whole point of gambling is winning money. Insurance brings other benefits that improve your life.
- yamrzou 2y ago
  > Insurance brings other benefits that improve your life. What other benefits besides the money that covers the losses?
  - gmane 2y ago
    Hedging risk. This is often a hard concept for people to grasp: there is value to hedging risk. It (generally) cannot be turned into money. There is extrinsic value to reducing risk.
    - lucianbr 2y ago
      But you are only able to hedge the money part of the risk. Life insurance does not bring anyone back, and health insurance only repairs your health as much as can be done with money. You can't insure against incurable diseases, as in the risk remains. You will just get some money to hopefully feel better, or for your children. Same with insuring some painting let's say. You can get enough money to buy a different painting, but the risk of losing that particular painting is still there. If it is a unique painting and it gets lost, how are they going to repair the non-monetary value of it? They can't. Hedging the risk of being shot by wearing armour sounds like actual hedging. Buying insurance against being shot sounds like just betting. The non-money part is exactly the difference, and it is missing in insurance.

instagib 2y ago

There is also the combination of self insuring. 0 An old boss had a dozen kids and his own personal business so he self insured his fleet as well as all the of age kids as employees. Gambling isn't about risking it all as some bets are safer than others for less rewards. 0. https://www.policygenius.com/auto-insurance/what-is-self-insured-car-insurance/ https://www.policygenius.com/auto-insurance/what-is-self-ins...

pdonis 2y ago

> Gambling is all about risking it all. I would say that gambling is about paying for entertainment, much like lotteries. Your overall expectation is that you will lose money, but the entertainment value of being able to imagine yourself winning a huge pot compensates for that. Of course the above assumes that you can afford to lose the amount of money you are gambling. The few times in my life I have gambled, that was always my approach: I set aside an amount I was willing to lose all of, and if I got to the point where it was gone, I stopped. But of course many people who gamble do not take that approach.

beloch 2y ago

Having insurance is gambling, but not having insurance is also gambling. This is because life itself is a gamble. We don't know what the future holds and we have the choice to insure or gamble on just about any aspect of our lives. Insurance companies are just like casinos in that the math always favours them if you look at a sufficiently large sample size. Even so, some things are still worth insuring. e.g. Your house. Most people do not have enough assets saved up to replace their house should it burn down. Even though your house will likely not burn down, protecting yourself against the loss of something you can't easily afford to replace is worth spending money on. Does it make sense to insure things you can replace though? Consider the "Instant product replacement" plans that stores constantly try to sell you. If your monitor dies you can easily absorb the cost of buying a new one. If, instead of buying IPR's on everything, you set aside a similar amount of money, you'll likely soon come out far ahead. Even if you don't, you'll still be able to afford it. Buying IPR's means, on average, you lose money. Not buying IPR's means, on average, you'll save money. The choice is easy. Insure the big, vital things you can't afford to replace. Treat insuring small things as gambling without the fun.

beefnugs 2y ago
What about the gamble that the whole thing is a scam from the beginning? If they are going to fight tooth and nail to never payout anyway its all insanity. Also how could insurance ever be a "for profit" business? That could never work. Profit means straight up planning scam right from the beginning, hoping that a big enough payout triggers business failure and you dont have to pay out anyone, yippee free and clear rug pull
- ghufran_syed 2y ago
  I think thats why states usually regulate the industry
- hattmall 2y ago
  >Also how could insurance ever be a "for profit" business? What? They plan to take in more in premiums than they pay out in claims by managing risks and underwriting. In that sense it's like a bookmaker who plans to set a line on a game that results in bets not having an imbalance that outweighs their vigorish. In cases where they do they lay off bets on other bookmakers. It's why they tend to be concentrated on certain areas and the same is true for insurance. Both of those are legitimate for profit businesses that use statistical modeling and risk management to turn profits and provide value to customers.

richrichie 2y ago

Both are lottery tickets if viewed from a pure financial contract perspective. Utility of a particular contract to a buyer is subjective.

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randomdata 2y ago

In other words, insurance is gambling's antidote. Gambling takes on a risk, insurance hedges against the risk taken. But if gambling is wrong – implying you shouldn't do it – what do you need insurance for? If you never gamble, you don't need to hedge the gamble. If gambling is wrong, then insurance must also be wrong by association. Perhaps it is not gambling that is wrong, but rather gambling for the sake of entertainment? That would have no doubt been seen as a diminishment of hard work under Protestant eyes. In other words, farming would have been seen as okay because it requires hard work, done for a purpose. A casino game, on the other hand, would not be acceptable as someone may gain (over and above the fun value) while having fun.

sholladay 2y ago

So far, I have made use of my car insurance policy two times. Each time I regretted it. First was for a rodent that somehow got into the space between the roof and the headliner, then died and made a mess. The second was for hitting a pothole at highway speed, which damaged a wheel and its control arm. In both cases, the insurance company paid the minimum they had to. For the rodent, sure they paid for the ceiling to be disassembled, fixed up, and reassembled. But did they pay for the interior detail that was necessary because of the rodent guts that had dripped from the ceiling? No, of course not. For the pothole, they paid for the wheel and control arm replacement and even one new tire. But did they help me pay for a tire on the other side so the wear could be reasonably symmetrical? No, of course not. How about the alignment I obviously got, which isn’t strictly necessary but really should be done after such an incident and installing a new drive wheel? No, of course not. Oh and they categorically consider hitting a pothole to be the driver’s fault, no matter the circumstances, so they raised the insurance premium on me. They made all of their money back within 18 months and now I’m still paying the higher rate. Insurance is such a scam. The company makes a profit despite their team of employees because they always price the premium above your level of risk. If the math made any sense for the customer, the company would break even or go bankrupt. I wouldn’t have insurance but it’s required in my state. The one good thing I can say about it is it helps ensure victims of car accidents get their medical bills paid for regardless of the financial status of the driver.

majormajor 2y ago
> I wouldn’t have insurance but it’s required in my state. Does your state require comprehensive/collision insurance? I've only lived places where you would be permitted to get liability-only insurance which would specifically not cover either of the situations you think you got screwed on. (Neither of which is why most people get insurance anyway. You get car-insurance beyond the legal minimum because while you will likely pay more in the long run, you won't have to deal with a surprise tens-of-thousands replacement bill out of nowhere if you accidentally total your car. Or because you have a loan and your lender doesn't trust you to go without it - of course, if you truly don't need insurance for something, you likely don't need a loan for it either. This is generally non-controversial and the "obviously it's a bad deal because the insurance company exists and pays salaries" hot take is... duh? well known? not an insight?)

Zanni 2y ago

Insurance—decrease variance. Gambling—increase variance.

thephyber 2y ago

This is mostly wrong. Gambling doesn’t require that you “risk it all”. In this way, your entire post looks like it’s arguing against a straw man. There is a way to gamble in which it is very similar to insurance — extremely defensive and conservative. But that means the gambler isn’t “enjoying” gambling, they are instead just being an accountant, but not earning a salary for it. They are both games of chance, but you fail to point out why gambling is most frequently outlawed: it is a compulsive behavior that becomes addictive in some people. When 11% of a society can’t maintain a gainful living (maybe they can’t hold a job or they become a habitual liar or a thief to feed their habit), governments tend to step in to dissuade the problematic behavior. But most people who gamble frequently tend to do it with their lizard brain and most people who purchase insurance do it with their cognitive brain (even if the underlying reasons aren’t based on facts). Then again, the premise of the question is arguably wrong. The state lottery is one of the biggest forms of gambling and that isn’t illegal (even though the origins were to supplant similar mob-run games).

JeffL 2y ago

Insurance for the consumer is lowering your expected value to reduce variance. Gambling for the consumer is lowering your expected value to increase variance. The profit and operating costs for both casinos and insurance companies is the lost EV of their patrons.

ossobuco 2y ago

You can approach gambling in the same exact way. It's called hedging your bets.

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