[Daisydog]

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State Farm / Allstate business model: Let's take a little bit of money from a whole bunch of people. We will calculate the odds of certain events happening. If the odds 'go their way' (car wreck, get cancer, house burns down, etc), we will reward them. We'll skim some off the side for ourselves. It's a true -EV bet for these suckers, yet they will still want to play. Heck, maybe we can even get laws passed to mandate they play with us! muhahahahahahaha

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I guess you could say insurance is -EV in that the premiums you pay are expected to be greater than the claim payments you will receive. You could also say iPods and haircuts are -EV because you pay more money for these things than you get back. The point is that with all these things you get something in return. With insurance you are getting risk pooling that would be difficult to do on your own. What about mutual funds? Are they -EV? They take a cut off the top but they provide diversification in return.

By the way, you could argue that you get something in return for the -EV associated with gambling, too (entertainment).

There are probably some bad insurance products out there, but, in general, I don't think people who buy insurance are suckers. There is probably a lot of economic activity that would not take place without the existence of insurance. For example, I would not have built my house if I could not have insured it. The bank would also not have loaned me money without it being insured. I'm willing to give up a little EV to the insurance company in exchange for protection from financial catastrophe.

In general, insurance is valuable to me, as are iPods, haircuts, mutual funds, and gambling. You could say they are all -EV, but you get something in return.