[rvb]

From one of the author's responses to comments:

"It’s that insurance is fundamentally zero-sum — the only transaction is money going back and forth. When you buy a refrigerator, say, your value for it is huge. (If refrigerators cost $50k you’d probably suck it up and buy one — how the hell are you going to live without a refrigerator?) So you come out way ahead when you get it for [I haven’t actually the faintest clue what a refrigerator costs]. And Maytag or whoever does too. Win-win! Insurance is fundamentally either win-lose or lose-win."

I don't think that's true. The consumer also gains a reduction in the variance of his or her expected outcomes. This is a good for people who have diminishing marginal utilities of wealth (most of us).

There're two components to the money going back and forth: the actual costs of the claims, and the insurance company's margin. The costs of the claims are like Maytag's production costs.

We buy the refrigerator if we value refrigeration more than the margin we give Maytag. Similarly, we buy insurance if we value the reduction in variance more than the margin we give the insurance company.

Whether or not the price is worth the value we get from the service is a different question; but it is not fundamentally win/lose.