Insurance can benefit the insured and insurer according to Kelly’s criterion depending on respective wealth and risk probability. Have a look at this blog for i

Insurance can benefit the insured and insurer according to Kelly’s criterion depending on respective wealth and risk probability. Have a look at this blog for intuitive examples where insurance is beneficial for both the insurer and insured. https://two-wrongs.com/the-misunderstood-kelly-criterion.html https://two-wrongs.com/the-misunderstood-kelly-criterion.htm... The thing that makes or breaks the Kelly criterion is the correct evaluation of risk. If the risk is incorrect then it is garbage-in garbage-out. Due to this uncertainty, people tend to use fractional Kelly criterion. For a car example, my current car price is a significant proportion of my total wealth and the risk of totalling it is perceived by me to be high, so I pay insurance. I say perceived because in 15 years of driving I never totalled a car. But now that I understand the Kelly criterion I will account for how expensive it is proportionately to my wealth and figure the cutoff price where I need to get total coverage insurance and how much it costs. It also explains by cell phone insurance and similar are normally not a good deal, the insured asset is worth a small proportion of my wealth.