[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.