No insurance is risk distribution. We all pay 5$ so none of us needs to pay 5,000,000$ which is not economically sustainable. What insurance companies get is administrative overhead fee. This has nothing to do with gambling.
The price of an insurance product is divided in 4 parts, the risk, the actuarial adjustment, administrative and distribution costs, and return of capital.
No, the risk is the probability of a claim times the value of a claim. If you just charge that is mathematically proven that the insurance pool is going to fail. The actuarial adjustment is there to create a surplus that guarantee the survival of the pool.
The return of capital is what the owners of the capital expect to get to have their money invested on the insurance company instead of moving their money to other investment opportunities.
But the capital provided by the owners is what is used to backstop the insurance and ensure the pot always exists. The amount of capital needed is calculated by the actuaries but supplied by the owners.
This is why I’m confused why you listed both an interest on capital and an actuarial adjustment.
Each product needs to sustain itself (risk+actuarial adjustment), pay for itself (admin and distribution costs) and give a return to the owners. You can’t use the actuarial adjustment as return of capital or the company is going to fail eventually.
The owners of the capital want the pool to sustain itself and a return of capital forever. You cant use the same money for both.
You gamble with which bookie (insurance company) you choose. You gamble when you choose where to live. You gamble how fast you can make your insurance claim. This shit is gambling through and through. And we (“The Common Person”) are getting fleeced.
If you pay, you lose money and might not be able to stay in business. If you don’t pay, they might rob you and burn down your store. Yes, life is a gamble.
Just because there is a statistical aspect to it doesn’t make it gambling. By your definition literally everything is gambling which is a very small brained take.
Insurance may be its own type of evil, but it’s not gambling. It serves me a financial purpose. It protects me from certain enormous and unexpected expenses which would otherwise cripple me financially for the rest of my life.
How aggressively insurance deny claims may be a symptom of the same problem to the ubiquity of online gambling apps and ads, unchecked greed, but they’re not the same.
IMHO we need peer to peer prediction markets, in which the insurance company is not the same party deciding who won the bet. Then your risk of denial would be more clear up front.
I don’t even know that I should refuse jobs that offer insurance through UnitedHealthcare until Luigi.
You are correct, because literally every choice we make is a gamble. Even crossing the street is “gambling” on getting hit by a drunk driver. But of course most insurance companies add a level of scammery and greed that is completely beyond any necessary price to protect farmers from a bad crop year etc. so ppl will rain hatred on your comment.
Insurance is gambling. You pay more in premiums than you get back in repayments after crashing. The house always wins.
Yet without Insurance business doesn’t function. Loss of expensive cargo or equipment wipes out the company.
No insurance is risk distribution. We all pay 5$ so none of us needs to pay 5,000,000$ which is not economically sustainable. What insurance companies get is administrative overhead fee. This has nothing to do with gambling.
The price of an insurance product is divided in 4 parts, the risk, the actuarial adjustment, administrative and distribution costs, and return of capital.
Aren’t the risk and the actuarial adjustment the same thing?
No, the risk is the probability of a claim times the value of a claim. If you just charge that is mathematically proven that the insurance pool is going to fail. The actuarial adjustment is there to create a surplus that guarantee the survival of the pool.
Yes, you need to hold enough money to cover more/larger claims than expected, but doesn’t the return on capital cover that part?
The return of capital is what the owners of the capital expect to get to have their money invested on the insurance company instead of moving their money to other investment opportunities.
But the capital provided by the owners is what is used to backstop the insurance and ensure the pot always exists. The amount of capital needed is calculated by the actuaries but supplied by the owners.
This is why I’m confused why you listed both an interest on capital and an actuarial adjustment.
Each product needs to sustain itself (risk+actuarial adjustment), pay for itself (admin and distribution costs) and give a return to the owners. You can’t use the actuarial adjustment as return of capital or the company is going to fail eventually.
The owners of the capital want the pool to sustain itself and a return of capital forever. You cant use the same money for both.
Nah nah nah; Insurance is like preem gammbling.
For example insurance companies couldn’t pay everyone back after Hurrican Katrina. First come first serve I guess. :P
To my understanding insurance companies isolate areas so if that area gets hit hard. The insurance company just files bankruptcy in the area and moves on..
You gamble with which bookie (insurance company) you choose. You gamble when you choose where to live. You gamble how fast you can make your insurance claim. This shit is gambling through and through. And we (“The Common Person”) are getting fleeced.
Sounds like a protection racket, like the mafia used to do. Does that still count as gambling?
If you pay, you lose money and might not be able to stay in business. If you don’t pay, they might rob you and burn down your store. Yes, life is a gamble.
Just because there is a statistical aspect to it doesn’t make it gambling. By your definition literally everything is gambling which is a very small brained take.
From the buyers point of view it reduces risk, so it is not gambling for them.
However it is gambling from the point of view of the underwriters.
(I am assuming both sides play fair and pay out when they should)
Insurance may be its own type of evil, but it’s not gambling. It serves me a financial purpose. It protects me from certain enormous and unexpected expenses which would otherwise cripple me financially for the rest of my life.
How aggressively insurance deny claims may be a symptom of the same problem to the ubiquity of online gambling apps and ads, unchecked greed, but they’re not the same.
From the buyers point of view I agree it is risk reduction. But it is gambling from the sellers point of view.
IMHO we need peer to peer prediction markets, in which the insurance company is not the same party deciding who won the bet. Then your risk of denial would be more clear up front.
I don’t even know that I should refuse jobs that offer insurance through UnitedHealthcare until Luigi.
You are correct, because literally every choice we make is a gamble. Even crossing the street is “gambling” on getting hit by a drunk driver. But of course most insurance companies add a level of scammery and greed that is completely beyond any necessary price to protect farmers from a bad crop year etc. so ppl will rain hatred on your comment.