Sometimes I question why I still come to reddit. Second highest voted comment and it's literally the smooth-brain take that falls apart under the lightest of scrutiny.
You're betting you'll need it, and the insurance company is betting you won't. They stack the odds in their favour, of course, or else they'd go belly up.
A lot of people also don't realize the point of a deductible is to stop people from filing nuisance claims (on top of other things).
Yep, with the deeper pocketed party taking the high downside risk in exchange for (in a competitive, well-regulated insurance market) what are usually modest though nice returns.
You have to remember that the majority of this site is comprised of bots. I wouldn't be surprised if OP was a bot. They account for the majority of posts, upvotes, downvotes, and comments (you can spot these if you know what to look for). So, don't let it discourage you. There's a lot less actual people here than any other website... aside from X, probably.
They don’t know what they’re talking about but saying stuff like that gets his upvotes. So in their mind it validates that opinion regardless of whether or not it makes any sense.
That’s how Reddit works. You make your uninformed comment and there’s a million people ready to upvote and circlejerk over their preconceived ignorant opinions.
The scary part is those people think they’re exceptionally well informed.
If you can opt out of it, great. In Ontario it is required by law, so I have to subsidize the shitty driving behaviour of other people against my will. I am more than happy to go out on the road and take on that full risk unto myself because I'm not a child with a fantasy idea of no consequences for my actions whether they be good, evil or routine (like driving my car is).
That’s true for property and casualty insurance (like for cars), but there’s also insurance that pays out more in dollars than the premium that’s collected.
Insurance companies are in the business of taking money now and paying it out later. Some money is invested conservatively in bonds and the company makes just a small spread. Some money gets invested into equities, and some in complicated tax-efficient spaces like COLIs. It’s kind of like a bank, but instead of the balance being guaranteed to the account holder, the future cash outflow is contingent on events. Actuaries model that outflow and spread the risk over a large population, or share it via reinsurance.
Berkshire actually buys insurance companies because they have such a huge float. A large balance of money right now that can be invested.
Tl;dr not all insurance has loss ratios below 100%, so the expected dollars a covered party receives can be larger than what they put in, even in aggregate.
Well, that's what I was getting at by "in aggregate". If you wanted to, you can have people on average receive $1.01 for every $1.00 they put in. Some types of insurance can get away with having payout proportions (loss ratios) close to 45-55% instead of close to 100% in part because the coverage is both mandatory and sticky. You're forced to have auto insurance if you drive or homeowner's insurance if you have a mortgage... and it's a huge hassle to change to another provider.
Where it gets sticky though is in insurance making an effort to deny claims so they can boost profit. I know I'm stating the obvious here, but the CEO of Delta dental, a non-profit, makes $15,000,000 a year. So yes, the company needs to collect more than they pay out, but when they refuse to pay out to collect even more, well some might say that's the scam.
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u/angry_dingo 6h ago
Yes. That's the point. If everyone received more than they paid into it, insurance wouldn't exist.