[afiori]

I think this is too reductionist as an interpretation.

With an insurance (especially something like travel/home insurances) you are not trying to game the premium, you are rather protecting risk of a preexisting situation.

Sure you can use it to gamble, like buying a few dozen houses and hoping they catch fire sooner than later.

Similarly with the stock market, stocks unlike a casino chips do produce value and represent real quota ownership of an asset. It can be misused in similar ways but it posses distinct qualities.

[lpilot]

You've identified a difference in motive between recreational gambling and insurance, not a mechanical difference. The woman in this article had different motives to the usual insurance customer.

The point is that one party says to the other "I will give you $X once a month, and if event E doesn't happen in that month, you get to keep this money, otherwise you must give me $Y (s.t.Y >> X)".

You can replace E with "my house burning down" or "The red team wins". In either case, I would call this a bet.

Insurance is just a specific type of gambling where you do it because E is bad and you want to be safe in case it does happen.

[saalweachter]

Insurance and gambling are the inverses of each other.

In gambling, the unlucky losers pay the lucky winners. The people who picked the winning horse, who threw the better roll of the dice, who invested in the right stock get paid.

In insurance, the lucky winners pay the unlucky losers. The people whose house burned down, who came down with a really expensive disease, who lost their jobs get paid.

[Klinky]

Not really. I don't think the insurance company thinks of themselves as a lucky winner when they have to payout a claim. They lost the bet.

However, in theory insurance is more about pooling risk, where payouts from claims do not exceed premiums collected from the risk pool. Though sometimes insurance companies overextended themselves into places where they are not collecting enough from the pool to cover claims.

[saalweachter]

The insurance company isn't really taking the other side of the bet, it's the rest of the risk pool.

If you are lucky, you will never be seriously sick in your life, never lose your job, and never have your house burn down. If you are so lucky, all of that money you pay for insurance goes to the people who are less lucky.

[Klinky]

So the insurance company is the bookie.

[lpilot]

Well, this is also how casinos work. Games are invented so that asymptotically, the gamblers will, on average, loose money.

Insurance companies achieve the same thing by setting your premiums according to whatever they assess the risk to be. Again, asymptotically, people pay more in insurance premiums than the insurer pays out.

The house always wins.

[SilasX]

Per narrator's comment above [1], a better way to explain the difference is that, for insurance, the insured doesn't want the event to happen, even knowing they'll get a payout, while in gambling, the insured wants the event to happen because of the payout.

This nicely aligns with what the practice of insurance actually involves: they do a lot to ensure that the client doesn't want the insured event to happen.

[1] https://news.ycombinator.com/item?id=23527972

[afiori]

> You've identified a difference in motive between recreational gambling and insurance, not a mechanical difference.

I see also this one as needlessly reductionist. By that logic also taking a day off from work to interview for a new job is gambling.

The difference I gave are also more than just motive. With insurances you are supposed to desire the risky activity (owning an house, booking a trip, driving) independently from the payout, and moreover the transition to insurance in meant to decrease the variation in outcomes. Two characteristic entirely adverse to the nature of gambling.

In a Russian Roulette analogy, gambling is betting money on who wins pushing people to play more and more as the payout increases hoping to leave a winner; insurance is more complex, it is taking an already running game that you had already chosen to play for your own reason with no money involved and introducing a fee that will payout to the loser's family. You are not supposed to want to "win" that bet, actually it is part of the insurer job to make sure of that.

It is still in the category of "financial probabilistic interaction" which is just one of various requirements for gambling.

[chaorace]

There is also a difference in pricing.

Gambling is priced as a game, a personal luxury. You pay quite little for a vanishingly small chance at a payout. Notice how there are very few people who actually ever "count on" a lottery ticket to pay out.

Insurance, on the other hand, is priced for the market. People will simply go somewhere else if the insurance company is taking too large of a slice.

In some cases, gambling can start to become insurance, if the gambling market is efficient enough. For example: "Matress Mack" when he insured himself against his "Free matresses if the Astros win the World Series" promotion using phone-in sports betting. Even in this case, however, the "insurance" seems costly at 13 million dollars!

[nsl73]

> a mechanical difference

Insurance and gambling have very different legal regulations in almost every jurisdiction.

[dillonmckay]

There was a slumlord in my area that used to buy flood insurance before a major flood, and then put a bunch of broken appliances in the units, prior to the flood, to claim the damages.

[afiori]

That sounds like insurance fraud. At least if that person declared known broken appliances as working I am almost sure it is insurance fraud.

[dillonmckay]

For sure, the guy was a scumbag.

[basilgohar]

What you are outlining are the "extra steps" that the GP was alluding to. We call it "risks" but it turns out to be a kind of a gamble that the insurance company takes us up on, but with the house advantage.

[afiori]

But then it is the insurance that is betting on you. Sort of like a Mr Beast video.

I would reserve gambling for something offered to some kind of a consumer/costumer market.