[kleinsch]

I think you're misconstruing the parent's point, and actually saying the same thing they are. They're not saying that insurance is an evil scam empire. They're saying it's a simple calculation: if you can't afford to replace it, buy insurance. If you can, don't.

In your example, the farmers can't afford to replace their farms, so they buy insurance.

The fact that the insurance company in your example is a non-profit is incidental. The farmers have two risks when paying insurance: paying too much and the insurance company not paying out in a disaster. If the insurance company has perfect information, premium == risk probability and everyone wins. Since they don't, they probably have to slightly overcharge - which is OK for the farmers bc they can't afford to replace their farms. If they undercharge, that's also a big risk for the farmers, since insurance in a geographic area faces massive correlation risk. If an earthquake burns down all the farms and the insurance company goes under, the farmers just lost their farms AND all the premiums they've been paying.