On Dec 1, 2007 12:46 PM, Michael Perelman <[EMAIL PROTECTED]> wrote: > What is unpredictable for an individual may be relatively predictable for a > larger > population; i.e. life insurance. The company does not know when I will die, > but > they have a pretty good understanding of when people of my age will die. >
Absolutely. That's the whole logic behind insurance - using the law of large numbers to make the risk more predictable when averaged over a large population. It works for life insurance. But in the case of health care each individual's needs may not be that unpredictable. For instance older people over 75 years of age, it is a near certainty they will require some form of medical care in the form of checkups, medicines etc. Even for one individual the probability of medical expenses is large maybe 50%. An analogy may be helpful. A factory can be insured against loss because of some disaster, like a fire or a hurricane. But it doesn't make sense to provide insurance for expenditures from machine wear and tear. There is substantially less uncertainty about the latter as compared to a disaster and it should be planned for not insured against. -raghu.
