5 ms·

> 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. Count

> 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.
  - pdonis 2y ago
    > That doesn't make it not gambling though. Yes, it does. As I said in response to you elsewhere, insurance means not accepting huge variance in payoff, whereas gambling means you do accept it. They're opposites of each other. The fact that the counterparties in both cases--insurance companies and casinos--end up making money from all of their customers on net does not mean the two things are the same.
  - Almondsetat 2y ago
    If gambling and insurance were the same you would be able to both frame insurance as a form of gambling and gambling as a form of insurance.
    - BugsJustFindMe 2y ago
      I believe I said that insurance is gambling, not that all gambling is insurance. If not I apologize. So I should be covered by what I already said elsewhere, that buying insurance is betting (aka gambling) that a bad thing will happen sooner rather than later or never. Now is all gambling insurance? Hmm. Maybe betting that something will happen is equivalent to insuring against its happening not financially benefiting you. Boom.
    - vbezhenar 2y ago
      IMO the main difference is that insurance provides two good outcomes while gambling only one. So you're buying car insurance. There are two outcomes: either your car will survive another year or you'll crash. First outcome: you're happy because you've got a survived car. Second outcome: you're happy because you've got insurance payout. Now you're buying lottery ticket. First outcome: you won the lottery and you've got the prize. Second outcome: you didn't win the lottery and you lost your money spent on lottery ticket.
    - lucianbr 2y ago
      There are multiple comments in this thread doing exactly that.
- lostmsu 2y ago
  > You can choose to live your life without insurance No, in many cases you can't. Health, car, homeowners, and renter's insurances are mandatory until you are wealthy.
  - seanmcdirmid 2y ago
    Health insurance isn’t mandatory in the USA. It’s a bad idea not to have it though. You might get away without insurance when you are young, however, assuming nothing bad happens. Without being able to price discriminate on pre-existing conditions, however, it’s not really free market insurance anymore. Liability Car insurance is mandatory only if you use public roads, which most people do. Collision insurance is only needed if you have a bank loan. Homeowner’s insurance is needed for a mortgage, renter insurance is required by a landlord. You can avoid most of these insurances if you are really rich, but most rich people carry even more insurance because they have more to lose, so they will have umbrella policies, for example. Ironically, it’s the really poor who can get out of having insurance: many states aren’t going to throw you in jail if you drive without a license or insurance, so now other people need uninsured driver insurance. Heck, it’s way too common where I live that many people have no insurance, even if our state requires really low levels of coverage. Health insurance is only needed if you have assets the hospital can sue for, but you will be going to the ER for everything so that sucks.
    - lostmsu 2y ago
      Well sure, if you are willing to violate a few laws you don't have to get insurance.
  - deleted 2y ago
    [deleted]
sailfast 2y ago
Insurance (outside of health insurance, which is not insurance in the typical sense) hedges your "bet" so it's not gambling to me. Your bet is that you'll drive a car without an accident. Insurance hedges that bet to reduce downside risk if there is an accident. You're paying a small amount to avoid a large loss, on purpose, knowing that it may not happen. You're not trying to get more out of it than you put in (at least on purpose) because that's fraud. Doesn't sound like a bet to me...
- BugsJustFindMe 2y ago
  > Your bet is that you'll drive a car without an accident. That's the ideal outcome, but it is not the bet being made by the person buying insurance. In fact the opposite. If you believed that you wouldn't have an accident you would not buy insurance. You buy insurance because you believe that you will likely have an accident at some point and that the accident will happen either soon enough or seriously enough that the cost of covering the accident will be greater than the total cost of insurance up to that point.
pdonis 2y ago
> 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. You are misunderstanding what insurance is for. The benefit that insurance conveys for the person insured is not that it is supposed to make money. It is risk avoidance. Without insurance, you might pay zero, or you might pay a very large sum that you can't afford. With insurance, you pay a predictable sum periodically, no matter what happens, and the insurance company is the one taking the risk of either paying zero or a very large sum, which hopefully the company can afford. In other words, just as the GP said, insurance is the opposite of gambling. In gambling, you accept the huge variance in payoff. In insurance, you transfer that risk to someone else. > Every time you pay and nothing bad happens leading to payout, that amount you spent that month is lost No, it isn't. You are getting something of value to you in return: risk avoidance. If that is of no value to you, then don't buy insurance. You might not regret it. But then again, you might.
- BugsJustFindMe 2y ago
  > The benefit that insurance conveys for the person insured is not that it is supposed to make money. Presuming you mean ending with more money than you started, gambling isn't either. Pay in vs pay out has no relation whatsoever to that except in passing. > It is risk avoidance. These are the same thing dressed in different names. There's only no making money on health insurance in the sense that you don't get to keep the money, but the only reason you're not "making" that money is because you have just incurred medical debt that the given money is obligated to cover per the terms. It's exactly the same as giving the money directly into your pocket on the condition that you use it immediately to clear your medical debt. You "made" all that money. You just also owe the full amount to someone else too. Consider term life insurance instead, where there is no extreme debt obligated to cover and your next of kin does just actually get a fat check.
  - pdonis 2y ago
    > Presuming you mean ending with more money than you started, gambling isn't either. That's true, but it doesn't mean insurance and gambling are the same thing. > These are the same thing dressed in different names. No, they're not. In gambling, I accept the risk involved in a wide variance in payoffs, for the entertainment value involved (since I can imagine that I might be a big winner); on net I am paying money for entertainment. In insurance, I transfer the risk involved in a wide variance in payoffs, for the peace of mind of not having to worry about being bankrupted if a rare but catastrophic event occurs; on net I am paying money for peace of mind (since I don't have to imagine that I might be a big loser). > Consider term life insurance instead But your next of kin only gets a payout if you die during the term. If you don't, nobody gets any payout and all the premiums you paid are lost. Which, since insurance companies make money selling term life insurance, is the expected average result. So on net, you do not make money buying term life insurance--but, as above, you might still do it if the peace of mind involved is worth it to you. > your next of kin does just actually get a fat check. But they are losing you--and even if we go to extreme cynicism about that, they are losing whatever income and other goods and services you provided, for which the check will hopefully be enough to compensate them. So it's not a pure gain with no offsetting loss, even leaving out the premiums paid.
deleted 2y ago
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NovemberWhiskey 2y ago
The difference between insurance and gambling is about what happens to your risk - whether it's a hedge or not. When you buy insurance, you pay a premium to make you whole should a random event occur in the future. You exchange a payment for certainty about future cash flows with respect to the insured risk. When you place a bet, you do the opposite. You exchange a payment for uncertainty about future cash flows with respect to the subject of the bet. If you insure against a risk to which you're not exposed (like: you take out a life insurance policy on a person you don't know with you as the beneficiary), then yes - that's risk taking rather than hedging. Commodities futures have similar aspects: if you're an aluminum producer then you can trade futures in order to reduce your exposure to variations in the market price. On the other hand, if you're a hedge fund trading those futures then you're probably doing the opposite - looking for exposure to risk. If you're going to take the position that a known cashflow now that returns an uncertain cashflow in the future is "gambling" then essentially all forms of economic activity are "gambling". It's reductio ad absurdum.
- snotrockets 2y ago
  Mind you, in the US, you are not allowed to take a life insurance on a person you don’t know (but you are allowed to buy a life insurance that person had taken on themselves)
  - FireBeyond 2y ago
    Cue flashbacks to Walmart buying life insurance for its employees (with Walmart as the beneficiary)... ... and the oh-so-charming way they referred to it at head office: "Dead Peasants Insurance".
    - sethammons 2y ago
      It is a derogatory industry term, also called janitor insurance. I can't find a source that says they called it that internally, which I think is relevant to the image being painted. I did find that winn-dixie (a grocer) insurance consultants did use the term internally. Source: https://www.wsj.com/public/resources/documents/april_19.htm https://www.wsj.com/public/resources/documents/april_19.htm

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.
- pdonis 2y ago
  > That doesn't make it not gambling though. Yes, it does. As I said in response to you elsewhere, insurance means not accepting huge variance in payoff, whereas gambling means you do accept it. They're opposites of each other. The fact that the counterparties in both cases--insurance companies and casinos--end up making money from all of their customers on net does not mean the two things are the same.
- Almondsetat 2y ago
  If gambling and insurance were the same you would be able to both frame insurance as a form of gambling and gambling as a form of insurance.
  - BugsJustFindMe 2y ago
    I believe I said that insurance is gambling, not that all gambling is insurance. If not I apologize. So I should be covered by what I already said elsewhere, that buying insurance is betting (aka gambling) that a bad thing will happen sooner rather than later or never. Now is all gambling insurance? Hmm. Maybe betting that something will happen is equivalent to insuring against its happening not financially benefiting you. Boom.
  - vbezhenar 2y ago
    IMO the main difference is that insurance provides two good outcomes while gambling only one. So you're buying car insurance. There are two outcomes: either your car will survive another year or you'll crash. First outcome: you're happy because you've got a survived car. Second outcome: you're happy because you've got insurance payout. Now you're buying lottery ticket. First outcome: you won the lottery and you've got the prize. Second outcome: you didn't win the lottery and you lost your money spent on lottery ticket.
  - lucianbr 2y ago
    There are multiple comments in this thread doing exactly that.
lostmsu 2y ago
> You can choose to live your life without insurance No, in many cases you can't. Health, car, homeowners, and renter's insurances are mandatory until you are wealthy.
- seanmcdirmid 2y ago
  Health insurance isn’t mandatory in the USA. It’s a bad idea not to have it though. You might get away without insurance when you are young, however, assuming nothing bad happens. Without being able to price discriminate on pre-existing conditions, however, it’s not really free market insurance anymore. Liability Car insurance is mandatory only if you use public roads, which most people do. Collision insurance is only needed if you have a bank loan. Homeowner’s insurance is needed for a mortgage, renter insurance is required by a landlord. You can avoid most of these insurances if you are really rich, but most rich people carry even more insurance because they have more to lose, so they will have umbrella policies, for example. Ironically, it’s the really poor who can get out of having insurance: many states aren’t going to throw you in jail if you drive without a license or insurance, so now other people need uninsured driver insurance. Heck, it’s way too common where I live that many people have no insurance, even if our state requires really low levels of coverage. Health insurance is only needed if you have assets the hospital can sue for, but you will be going to the ER for everything so that sucks.
  - lostmsu 2y ago
    Well sure, if you are willing to violate a few laws you don't have to get insurance.
- deleted 2y ago
  [deleted]

sailfast 2y ago

Insurance (outside of health insurance, which is not insurance in the typical sense) hedges your "bet" so it's not gambling to me. Your bet is that you'll drive a car without an accident. Insurance hedges that bet to reduce downside risk if there is an accident. You're paying a small amount to avoid a large loss, on purpose, knowing that it may not happen. You're not trying to get more out of it than you put in (at least on purpose) because that's fraud. Doesn't sound like a bet to me...

BugsJustFindMe 2y ago
> Your bet is that you'll drive a car without an accident. That's the ideal outcome, but it is not the bet being made by the person buying insurance. In fact the opposite. If you believed that you wouldn't have an accident you would not buy insurance. You buy insurance because you believe that you will likely have an accident at some point and that the accident will happen either soon enough or seriously enough that the cost of covering the accident will be greater than the total cost of insurance up to that point.

pdonis 2y ago

> 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. You are misunderstanding what insurance is for. The benefit that insurance conveys for the person insured is not that it is supposed to make money. It is risk avoidance. Without insurance, you might pay zero, or you might pay a very large sum that you can't afford. With insurance, you pay a predictable sum periodically, no matter what happens, and the insurance company is the one taking the risk of either paying zero or a very large sum, which hopefully the company can afford. In other words, just as the GP said, insurance is the opposite of gambling. In gambling, you accept the huge variance in payoff. In insurance, you transfer that risk to someone else. > Every time you pay and nothing bad happens leading to payout, that amount you spent that month is lost No, it isn't. You are getting something of value to you in return: risk avoidance. If that is of no value to you, then don't buy insurance. You might not regret it. But then again, you might.

BugsJustFindMe 2y ago
> The benefit that insurance conveys for the person insured is not that it is supposed to make money. Presuming you mean ending with more money than you started, gambling isn't either. Pay in vs pay out has no relation whatsoever to that except in passing. > It is risk avoidance. These are the same thing dressed in different names. There's only no making money on health insurance in the sense that you don't get to keep the money, but the only reason you're not "making" that money is because you have just incurred medical debt that the given money is obligated to cover per the terms. It's exactly the same as giving the money directly into your pocket on the condition that you use it immediately to clear your medical debt. You "made" all that money. You just also owe the full amount to someone else too. Consider term life insurance instead, where there is no extreme debt obligated to cover and your next of kin does just actually get a fat check.
- pdonis 2y ago
  > Presuming you mean ending with more money than you started, gambling isn't either. That's true, but it doesn't mean insurance and gambling are the same thing. > These are the same thing dressed in different names. No, they're not. In gambling, I accept the risk involved in a wide variance in payoffs, for the entertainment value involved (since I can imagine that I might be a big winner); on net I am paying money for entertainment. In insurance, I transfer the risk involved in a wide variance in payoffs, for the peace of mind of not having to worry about being bankrupted if a rare but catastrophic event occurs; on net I am paying money for peace of mind (since I don't have to imagine that I might be a big loser). > Consider term life insurance instead But your next of kin only gets a payout if you die during the term. If you don't, nobody gets any payout and all the premiums you paid are lost. Which, since insurance companies make money selling term life insurance, is the expected average result. So on net, you do not make money buying term life insurance--but, as above, you might still do it if the peace of mind involved is worth it to you. > your next of kin does just actually get a fat check. But they are losing you--and even if we go to extreme cynicism about that, they are losing whatever income and other goods and services you provided, for which the check will hopefully be enough to compensate them. So it's not a pure gain with no offsetting loss, even leaving out the premiums paid.

deleted 2y ago

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NovemberWhiskey 2y ago

The difference between insurance and gambling is about what happens to your risk - whether it's a hedge or not. When you buy insurance, you pay a premium to make you whole should a random event occur in the future. You exchange a payment for certainty about future cash flows with respect to the insured risk. When you place a bet, you do the opposite. You exchange a payment for uncertainty about future cash flows with respect to the subject of the bet. If you insure against a risk to which you're not exposed (like: you take out a life insurance policy on a person you don't know with you as the beneficiary), then yes - that's risk taking rather than hedging. Commodities futures have similar aspects: if you're an aluminum producer then you can trade futures in order to reduce your exposure to variations in the market price. On the other hand, if you're a hedge fund trading those futures then you're probably doing the opposite - looking for exposure to risk. If you're going to take the position that a known cashflow now that returns an uncertain cashflow in the future is "gambling" then essentially all forms of economic activity are "gambling". It's reductio ad absurdum.

snotrockets 2y ago
Mind you, in the US, you are not allowed to take a life insurance on a person you don’t know (but you are allowed to buy a life insurance that person had taken on themselves)
- FireBeyond 2y ago
  Cue flashbacks to Walmart buying life insurance for its employees (with Walmart as the beneficiary)... ... and the oh-so-charming way they referred to it at head office: "Dead Peasants Insurance".
  - sethammons 2y ago
    It is a derogatory industry term, also called janitor insurance. I can't find a source that says they called it that internally, which I think is relevant to the image being painted. I did find that winn-dixie (a grocer) insurance consultants did use the term internally. Source: https://www.wsj.com/public/resources/documents/april_19.htm https://www.wsj.com/public/resources/documents/april_19.htm