re: Does insurance violate the basic laws of economics?

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The reduction of financial risk has no value when there is no actual loss.The reduction of financial risk has no value when there is no actual loss. At least not to the purchaser, and at least not in any quantifiable way.

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Absolutely untrue. Assets with zero risk are more valuable than assets at risk. This is very simple.

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Completely correct. And I think the biggest problem with the Louisiana insurance market, especially relative to home insurance, is that everyone is having difficulty figuring out where the "x" lies between 0 and 100.

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The risk is quantifiable. But, the politicians and customers don't like the result.

A market exists when the seller and buyer disagree on value, but agree on a price. Unfortunately, setting the price in LA has all sorts of interventions that are outside of the buyer and purchaser's control.

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Now you are getting into acutarial science as well as the unpredictable forces of nature, none of which are economic issues.

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Huh? Assessing risk always an economic calculation. And it's not based on a guess.

Property insurance mandated by mortgages and car liability insurance operate just like taxes.

Except it isn’t at all, because the carriers have to have reserves that are constantly monitored, the government has guarantee programs if insolvency occurs, and they must buy reinsurance as well.

Nope. As another poster pointed out, the value that you are buying with insurance is the transfer of great risk to another entity for a small fee. It makes much more productivity possible in our economy as individuals and companies can participate in activities that they otherwise could not participate in.

Here we go again lol

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No, “owning” things people can’t afford is what creates the need for insurance.

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that's overly simplistic and not necessarily a blanket truth.

I own my house (or will own it outright in a little over a year from now).
my house took significant damage from Hurricane Ida.

If I pay for all of those damages out of pocket (which I ended up doing thanks to my homeowner's insurance company filing bankruptcy in Ida's wake), then you have to tack that $70k on to what I paid for the house.

but the value of my house doesn't increase by $70k despite me spending that on it.

meaning I just added $70k to the cost of my house while the value remained stagnant.

So if I sell it, I take a $70k hit (with some movement due to market at time of sale obviously).

Had I sold it "as is" prior to repairs, then the value is nowhere near what I paid for it and I lose big there.

I can afford the house.
I paid to fix it.

throwing away $70,000 isn't a very wise financial decision whether you can afford it or not.

Insurance basics will always perplex the OT. This place is full of idiots who think they know everything.

It is gambling when you boil it down. I know a lot of insurance agents and all of them are doing quite well selling a reoccurring yearly product.

Yes we are doing quite well, thank you. Not sure what your point is though.

Not as fun as reading through insurance threads on the OT where everyone is an expert