2 ms·
> "insurance" means there's some chance you're having an adverse event, and a lot of chance you don't Exactly. Classic insurance is a bet: the insured is betti
by teeray 2y ago
> "insurance" means there's some chance you're having an adverse event, and a lot of chance you don't
Exactly. Classic insurance is a bet: the insured is betting that something bad will happen (e.g. house burns down), and the insurer is betting that it will be fine.
The problem with health insurance is that the insured will always be correct eventually. The model fundamentally doesn’t work, except if you adjust the parameters of timescale, population, etc. (which tends to be grossly discriminatory except for voluntary behaviors like smoking).
- wjnc 2y agoI disagree. Insurance isn’t a bet. Bets are zero sum (or worse). Insurance isn’t zero sum. It’s a structured redistribution of risk bringing both an improved expected utility (if we assume risk aversion) And expected profits to the risk takers. (The funny economist would argue that a casino is the same if we assume the opposite of risk aversion (tolerance / seeking)). I agree with the point that for high chance, low impact events insurance is less efficient. Follows from the same basic utility theory. Insurance is not costless and costs will start to dominate benefits. The intergenerational aspects of health insurance are a good point. Inflation and medical-technological progress still make insurance a good solution in my book. You can save for a pension (still looking at most of the Western world for saving too little); it’s harder to save for unknown future costs whose height is dependent on where the medical risk falls.