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.
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.