Originally Posted By: canuckInOR
Originally Posted By: TigerJimmy
1. "Insurance" is for risk aggregation of large impact, but rare events. Since nearly everyone is guaranteed to become sick and require increasingly expensive (and magical!) treatments, almost everyone will have the opportunity to spend frightful amounts of money to stay alive a few more months, unless they die quickly from an accident or something. There is nothing rare about getting sick. Specific diseases, perhaps, but in aggregate everyone will eventually have something that could break the bank. So, there is no "risk" here, properly understood. As a result, insurance is the wrong model.

I disagree with this, entirely. The whole notion of insurance was created back when traders were sailing the oceans. Since nearly every trading company was guaranteed to have a ship sink and lose significant investment, almost every trading company had the opportunity to spend frightful amounts of money to stay in business a few more months, unless they lose their whole fleet at once in a freak storm or something. There was nothing rare about losing a ship. Losing one (or more) with an extremely costly cargo, perhaps, but in aggregate every company will eventually have a ship sink which could put them out of business. So, there is risk there, properly understood.

It's no different with being sick -- I don't know when, or where I'll get sick. It could be now, it could be 20 years from now, but I do expect I'll get sick at some point. The risk is, will it be catastrophic enough to wipe me out financially for whatever reason. With the traders, they don't know when, or where they'll lose a ship. They might lose one this trading season, or not for several years, but they are expecting to lose a ship. The risk is, will it be catastrophic enough to wipe them out financially?

That said, private insurance makes sense for traders -- it's a small group of people amongst whom the risk needs to be shared. With health care, it's silly to have private insurance -- the group of people needing such insurance isn't small, it's the entire population. That's why it makes sense to have a single-payer system, IMHO.


Sorry, but you're misunderstanding this entirely. A smallish fraction of the total number of cargoes were lost. If all cargoes were lost, or nearly all, as in the case with sickness, insurance would not work. As the probability of loss for each individual voyage increases, risk aggregation becomes less and less effective. Technically, it is still effective, but less worthwhile. When the probability approaches 100%, as in the case of sickness and death in humans, then it is of almost no value. Risk, in this sense (which I called "properly understood" means a small chance of a large consequence. It's not risk if you know it's going to happen -- it's certainty.

Your argument compares insurance of a single shipment or cargo to a long sequence of events in which loss is almost assured. That's a logical mistake.

Just look at it this way: if everyone (or nearly everyone) will eventually face medical bills higher than their wealth, who will pay for it? The idea of medical "insurance" is a Ponzi scheme, because the probability of catastrophic expense is nearly 100%.