And specifically, the risk they hedge against is usually some major risk to themselves. So insurance is similar to a social safety net in some sense. If there’s a (totally made up) 1⁄100 lifetime chance of each person being severely injured in a car crash, and such an injury would both cost me a lot of money and a lot of earning power, then of course I’d want to insure against it. Even though the insurance company takes a cut, I’d much rather lose money on this insurance contract than collect on it. And we hope that market competition prevents the insurers from taking too big of a cut, because the insurers compete on rates. Prediction markets just don’t serve this function at all.
People in this thread are focusing too much, I think, on bespoke kinds of insurance (which is most kinds of insurance), and not enough on normal everyday insurance (which is most actual insurance contracts).
And specifically, the risk they hedge against is usually some major risk to themselves. So insurance is similar to a social safety net in some sense. If there’s a (totally made up) 1⁄100 lifetime chance of each person being severely injured in a car crash, and such an injury would both cost me a lot of money and a lot of earning power, then of course I’d want to insure against it. Even though the insurance company takes a cut, I’d much rather lose money on this insurance contract than collect on it. And we hope that market competition prevents the insurers from taking too big of a cut, because the insurers compete on rates. Prediction markets just don’t serve this function at all.
People in this thread are focusing too much, I think, on bespoke kinds of insurance (which is most kinds of insurance), and not enough on normal everyday insurance (which is most actual insurance contracts).