Honkey wrote:#5- Insurance companies actually LOSE money most of the time on any line besides auto iand life insurance. The onyl way they make money is through wise investing.
Sure, but that's actually irrelevant to the customer who is weighing not only the "pay in, get out" but the same opportunity cost of what to do with the capital.
Honkey wrote:Also... the custoemr likes to take on a direct approach of "this is what I paid in this is what they paid out" but that is ignoring the government bureaucracy, and all the people that need to be employed to make an insurance company properly run. A typical profitable customer is actually around the 60% range, meaning that if we pay out more than 60% of their premiums they have paid in, we have lost money, and I would say over half if not more of the customers In our agency are unprofitable.
Fine, but again, irrelevant to the customer. He's not making the claim that he could run an insurance company more efficiently but rather just considering whether - on average - it is cheaper cover the replacement/repair cost out of pocket if something should happen or get insurance. And as I stated - on average it is cheaper to pay yourself. This is a pretty simple concept... insurance companies do not create money (or rather, in any way that they do such as investment, individuals can do it too). So yeah, the place where you need insurance is in situations where you could not afford to pay if something where to happen. i.e. liabilities, cars, houses, medical, etc.
Honkey wrote:you pay some money to make sure everything you worked for and have earned doesn't slip away because of one mistake, or an unavoidable event.
Right, precisely. And I fully agree that in situations like driving people are in far less control of outcomes than they think they are. But conversely, if I can afford to cover the cost of an event (say my toaster breaks... I can buy a new one) then insurance is not financially prudent.
I don't think I'm fundamentally disagreeing with anything you're saying, just pointing out that insurance only makes sense on relatively large value items/situations since it is those that you want to amortize the risk across large numbers of people. That's what insurance does after all.