If you are actually worried about getting ransom insurance in case of being kidnapped, maybe you should just skip the job.
If you really want the job, ask for an extra for paying the insurance yourself. That way you are 100% sure you go coverage (if you don't forget to pay the insurance!)
Personally, I wouldn't take that job, even if I could buy the best insurance myself. I just don't like betting against myself.
from a more positive angle, you can think of insurance as a way to re-allocate your risk portfolio in a way that better suits your strengths & weaknesses
You can think of insurance as a small & certain loss to hedge against a large & uncertain loss.
If stuff happens and you do need to cash in on that insurance policy, the payout should be thought of as saving your butt, also known as indemnification.
An airbag in your car is a form of insurance. You spent $X to protect yourself in a collision. The small & certain loss is spending the $X. Say you unexpectedly end up in a crash, but instead of dying, the airbag saves your life. It protected you from a death, the large & uncertain loss.
The idea of that buying an insurance is making a bet against yourself doesn't make sense to me. Insurance is more about making sure you don't lose. It's reducing risk, and a bet feels like taking on risk. The insurance company is the one making the bet, not the policy holder.
You know the best way to make the road super safe?
Replace the airbags by a long pointy metal spike that goes next to the driver throat.
Would that impact the way you drive? I think you would be super careful. Then, why do you think an airbag will not impact the way you drive? It does - only in the other direction.
We all have unconscious bias. Insurance increase risk. I want to minimize my risk, not my average payout. This requires recognizing my own biases.
If I'm kidnapped and dead, all the money in the world won't bring me back. So I'd rather feel unsafe, as it will discourage me from taking risks. In other words, I will not bet against myself.
I don't like making bet against myself, regardless of the reasons behind. So in general, I only take the minimum insurance legally mandated.
In the OP post, you can see that the existence of an insurance will increase his desire to take the job, and thus the risk of being kidnapped. I wouldn't do that, but I'm just talking about me
If that were true we should see an increase in fatalities per mile driven as safety features increase. We haven’t[1]. They have actually plummeted as cars have gotten safer.
Proposition: IF safety features increase AND safety features cause drivers to behave more recklessly THEN there will be an increase in traffic fatalities.
This does not hold if the reductions in fatalities caused by the safety features are larger than the (alleged!) increase in fatalities caused by additional recklessness.
Sure, but the GP’s hypothesis was that “the best way to make the road super safe [is to] replace the airbags by a long pointy metal spike that goes next to the driver throat.” That doesn’t follow.
No, insurance works because of the asymmetry of the payoffs. It's a positive sum interaction because the insurer thinks they've priced the policy with enough margin to make a profit, but you think it's a great deal because it looks cheap enough that you'll buy it even though the thing it guards against is improbable.
I'm not claiming there's trickery involved. It's just a positive-sum trade between two agents. Normally I would write down an example to clarify what I'm saying but not right now, sorry. I agree that the phrase "asymmetric payoffs" is unclear/confusing.
I don't think it's betting against yourself. It's just allocating some funds to an alternative version of yourself that has had bad fortune. You can think of it probabilistically.
Buying home fire insurance is betting your house will burn down. Buying kidnap insurance is betting you're going to get kidnapped.
That's why it's usually not legal to take insurance out on things that are not you or that you own or are responsible for. Like me taking life insurance out on you, then convincing you to take up crack or simply killing you. I'm betting you're going to die at some odds, then I'm massively changing the odds in my favour relative to the initial bet. Insurance is just gambling with vast sums. Sometimes it makes sense, sometimes it doesn't.
No, insurance is gambling with small sums from the point of view of people selling it, and it is avoiding gambling with large sums from the point of view of people buying it.
But probabilistically doesn't it make sense to skip insurance altogether?
If insurance manages to turn a profit despite having overhead expenses (salespeople, infrastructure, lawyers, etc) and assuming they don't have a special discount in whatever they're ensuring then there are more people paying without using than there are people who need it.
If I'm an average or above average driver, for example, then it doesn't make sense to have insurance, does it? Wouldn't it make more sense to save the money I'd otherwise be using for insurance and pay myself in case something happens? That way my money would go only towards my problem and not towards worse drivers and insurance company expenses.
Is the product that insurance offer really just peace of mind?
Have a look at the expected utility Wikipedia article. In short:
The difference between owning a total of 0 and a total of 10000 USD is way more important than the difference between owning 10000 and 20000 USD.
So assume you have 20000 USD. There's a 10% change that you will lose it all and become homeless. It makes sense for you to pay 2000 USD at the start to get 10000 USD back in case that happens. Because being homeless in 10% of the cases is way worse than having 18000 USD instead of 20000 USD in 90% of the cases.
If I were trying to explain insurance to a person from Mars, I guess I would say humans will pay a premium to reduce variance in cash flows. This is a win-win situation, not a case of one party taking advantage of the other. It's one of the basic services that underpins civilization.
> If I'm an average or above average driver, for example, then it doesn't make sense to have insurance, does it?
You’re waiting at a red light when a drunk driver smashes into you. Your skills as a driver can’t affect the probability of this. It may not be your fault, but someone needs insurance.
If you really want the job, ask for an extra for paying the insurance yourself. That way you are 100% sure you go coverage (if you don't forget to pay the insurance!)
Personally, I wouldn't take that job, even if I could buy the best insurance myself. I just don't like betting against myself.