On Jan 24, 12:31 pm, "[email protected]" <[email protected]>
wrote:
> > The insurance industry has most to lose if they are not!
>
> Insurance companies make money by scaring their customers and
> competitors. What matters is not whether there are few or many
> hurricanes. What matters is that the customers and competitors are
> scared into believing damage will be high, so that customers will pay
> high insurance premiums and competitors will shy away from
> undercutting you. Then, as it turns out that the actual damage is low,
> you make tons of money.
Actually insurance companies make money by arranging to have a utility
function that is differs from their customers.
Customers (except maybe for a few confused ones like you) expect to
get a
negative return on the premiums they pay. The are willing to give the
insurance company that positive return in order avoid financial risks.
It is not necessary that the customers overestimate the risk.
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