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I drew the opposite conclusion from your story that you did, which is most simply exemplified by your point: > insurance costs come closer to the expected cost
by ronaldx 13y ago
I drew the opposite conclusion from your story that you did, which is most simply exemplified by your point:
> insurance costs come closer to the expected costs of treatment.
In general, insurance costs are above the expected cost of treatment (this is essential, or insurance would be unprofitable).
As such, insurance costs coming closer to the expected cost of treatment is a good thing.
If I know for sure that I will need treatment (assuming my insurer has the same information), I shouldn't seek to buy insurance.
Insurance is designed as a cover for risk - the only reason I can buy insurance at a rate cheaper than the treatment itself because of the possibility that I won't need the treatment, and the insurance company will keep the money.
- joosters 13y ago> In general, insurance costs are above the expected cost of treatment I think we're confusing terms here. Insurance policy costs are always below the cost of payout. Otherwise, why buy them? My house insurance costs less than my house, my car insurance costs less than my car, and so on. Sure, insurance cost x probability must be above the expected payouts. I am referring to the insurance prices that people pay, not the insurer's expected costs.
- ronaldx 13y agoOK. I took expectation to have a specific mathematical meaning here (average including 0s). Sorry for confusion. In any case, I still don't agree with your point. If everyone knows what's going to happen in the future, there's no insurance industry beyond pre-payment stamp collecting. I don't see that as necessarily a bad thing.