>> You're missing the point that, on average, insurance benefits the insurance company, not the policy holders. How do we know this? Because insurance companies are eager to sell you a policy.
> As a general argument, this is not valid. Consider a parallel argument: on average, selling food benefits the grocery store, not its customers. How do we know this? Because the store is eager to sell you food.
You're comparing a tangible purchase with an intangible one. They aren't comparable. It's one thing to walk out of a store with a loaf of bread, but quite another to walk out with a promise to deliver a loaf of bread only if a certain series of events takes place.
With insurance, you aren't buying a tangible thing, you're buying risk immunity. Pricing risk immunity is not at all like pricing bread -- there are many more issues.
There are any number of people who make the same mistake you're making -- they think of insurance as a straightforward commodity purchase. Insurance companies love this way of thinking -- it keeps people from evaluating the transaction in realistic terms.
But insurance is not bread. Insurance is one strategy for managing risk, but it's not the only one. For many people, self-insuring is a much better approach to managing risk. And as an institution becomes larger, the likelihood that they will self-insure also becomes larger, for a simple reason -- it's more cost-effective.
Insurance is one strategy for managing risk, but it's not the only one. For many people, self-insuring is a much better approach to managing risk.
All this is quite true, but it doesn't refute what I was saying. I was saying that there can be circumstances where purchasing risk immunity (IMO a better term would be risk transfer) is a net gain for both parties, because the person purchasing it values it highly enough. You admit this is true since you admit people should purchase insurance on things they can't afford to lose.
A lot of the people you are arguing with in this thread are basically saying they can't afford to lose their house; or, equivalently, that purchasing the risk transfer is worth it to them. It's not responsive to just say "no it isn't"; in some cases it is.
Pricing risk immunity is not at all like pricing bread -- there are many more issues.
Then maybe we should focus discussion on those issues, instead of on blanket generalities. What are the issues?
> As a general argument, this is not valid. Consider a parallel argument: on average, selling food benefits the grocery store, not its customers. How do we know this? Because the store is eager to sell you food.
You're comparing a tangible purchase with an intangible one. They aren't comparable. It's one thing to walk out of a store with a loaf of bread, but quite another to walk out with a promise to deliver a loaf of bread only if a certain series of events takes place.
With insurance, you aren't buying a tangible thing, you're buying risk immunity. Pricing risk immunity is not at all like pricing bread -- there are many more issues.
There are any number of people who make the same mistake you're making -- they think of insurance as a straightforward commodity purchase. Insurance companies love this way of thinking -- it keeps people from evaluating the transaction in realistic terms.
But insurance is not bread. Insurance is one strategy for managing risk, but it's not the only one. For many people, self-insuring is a much better approach to managing risk. And as an institution becomes larger, the likelihood that they will self-insure also becomes larger, for a simple reason -- it's more cost-effective.