Is insurance always evil/stupid?

Shadowrun · #1 03-12-2007, 04:06 PM

For some reason every time insurance is brought up, people always talk about how stupid/useless it is. However, as my chart shows that is not always the case.
Here it makes sense to pay up to 4,000 (to guarantee at least you get 16,000) if you can either choose point A or point E.

BCPVP · #2 03-12-2007, 04:20 PM

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For some reason every time insurance is brought up, people always talk about how stupid/useless it is.

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Anyone in particular...?

DVaut1 · #3 03-12-2007, 04:30 PM

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For some reason every time insurance is brought up, people always talk about how stupid/useless it is.

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Anyone in particular...?

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Also, what does the OP have to do with the Politics forum?

Regardless, as far as insurance goes, some people are willing to take -EV propositions to avoid the ruinous consequences of possible catastrophes, and I don't necessarily see that as evil or stupid.

In other words, I understand that when I buy home-owners insurance, it's a -EV play, but I sleep better at night because of it.

Shadowrun · #4 03-12-2007, 04:40 PM

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For some reason every time insurance is brought up, people always talk about how stupid/useless it is.

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Anyone in particular...?

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Also, what does the OP have to do with the Politics forum?

Regardless, as far as insurance goes, some people are willing to take -EV propositions to avoid the ruinous consequences of possible catastrophes, and I don't necessarily see that as evil or stupid.

In other words, I understand that when I buy home-owners insurance, it's a -EV play, but I sleep better at night because of it.

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another example sir

Lets say your house has 50,000 worth of stuff in it.
Lets say the probability to get robbed is .1 (and obviously to not get robbed is 9).

So we have an EV of 49,000 (with a std dv of 3000)

so how much insurance can one pay for it to be neutral EV
the answer is 1,000.
since paying 1,000 in insurance give you an expected value of 49,000 was well (with 0 in standard deviation)

so if you can get a price for less than 1,000 dollars, insurance becomes +EV.

mosdef · #5 03-12-2007, 04:42 PM

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another example sir

Lets say your house has 50,000 worth of stuff in it.
Lets say the probability to get robbed is .1 (and obviously to not get robbed is 9).

So we have an EV of 49,000 (with a std dv of 3000)

so how much insurance can one pay for it to be neutral EV
the answer is 1,000.
since paying 1,000 in insurance give you an expected value of 49,000 was well (with 0 in standard deviation)

so if you can get a price for less than 1,000 dollars, insurance becomes +EV.

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This is a pretty silly example, because insurance can't be -EV for the insurance company in aggregate or they will go bankrupt. Overall, the insurance company makes money (and they're really good at it, too).

Shadowrun · #6 03-12-2007, 04:45 PM

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another example sir

Lets say your house has 50,000 worth of stuff in it.
Lets say the probability to get robbed is .1 (and obviously to not get robbed is 9).

So we have an EV of 49,000 (with a std dv of 3000)

so how much insurance can one pay for it to be neutral EV
the answer is 1,000.
since paying 1,000 in insurance give you an expected value of 49,000 was well (with 0 in standard deviation)

so if you can get a price for less than 1,000 dollars, insurance becomes +EV.

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This is a pretty silly example, because insurance can't be -EV for the insurance company in aggregate or they will go bankrupt. Overall, the insurance company makes money (and they're really good at it, too).

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thats a good point, but what if they are subsidized (so instead of paying out full price the government pays some out money).

the point of the example was just to show that most posters think that insurance is always -EV i just wanted to show that it doesnt have to be the case.

csuf_gambl0o0r · #7 04-23-2007, 08:44 AM

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For some reason every time insurance is brought up, people always talk about how stupid/useless it is.

[/ QUOTE ]
Anyone in particular...?

[/ QUOTE ]

Also, what does the OP have to do with the Politics forum?

Regardless, as far as insurance goes, some people are willing to take -EV propositions to avoid the ruinous consequences of possible catastrophes, and I don't necessarily see that as evil or stupid.

In other words, I understand that when I buy home-owners insurance, it's a -EV play, but I sleep better at night because of it.

[/ QUOTE ]

another example sir

Lets say your house has 50,000 worth of stuff in it.
Lets say the probability to get robbed is .1 (and obviously to not get robbed is 9).

So we have an EV of 49,000 (with a std dv of 3000)

so how much insurance can one pay for it to be neutral EV
the answer is 1,000.
since paying 1,000 in insurance give you an expected value of 49,000 was well (with 0 in standard deviation)

so if you can get a price for less than 1,000 dollars, insurance becomes +EV.

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How do you get 49,000 for the original EV?

dopp16 · #8 03-12-2007, 07:45 PM

People that don't believe in insurance believe that life revolves around expected value. They feel that if something is -EV it is incorrect. These are the same people that think when someone pulls a 1 outer on the river that they are cursed or unlucky.

Insurance, nor insurance people are "evil." Insurance is used to avoid catastrophic events that could ruin your life. And like a previous poster said, it may be worth a little -EV to be able to sleep at night.

Shadowrun · #9 03-12-2007, 08:08 PM

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People that don't believe in insurance believe that life revolves around expected value. They feel that if something is -EV it is incorrect. These are the same people that think when someone pulls a 1 outer on the river that they are cursed or unlucky.

Insurance, nor insurance people are "evil." Insurance is used to avoid catastrophic events that could ruin your life. And like a previous poster said, it may be worth a little -EV to be able to sleep at night.

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again the whole point of me making this thread and providing the two examples is to show that insurance doesnt HAVE to be -EV and can be in fact +EV or Neutral EV.

dopp16 · #10 03-12-2007, 08:24 PM

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People that don't believe in insurance believe that life revolves around expected value. They feel that if something is -EV it is incorrect. These are the same people that think when someone pulls a 1 outer on the river that they are cursed or unlucky.

Insurance, nor insurance people are "evil." Insurance is used to avoid catastrophic events that could ruin your life. And like a previous poster said, it may be worth a little -EV to be able to sleep at night.

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again the whole point of me making this thread and providing the two examples is to show that insurance doesnt HAVE to be -EV and can be in fact +EV or Neutral EV.

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It depends on whether the V in EV is solely monetary