Insurance companies are in a much better negotiating position than private buyers, because they’re dealing in bulk, so their expenses are based on paying much lower prices for services than their members would get if they bought individually.
Other commenters have already addressed the difference between expected utility and expected monetary return, but in fact having insurance can have a positive expected monetary return simply because you’re forced to pay more when buying the services privately.
Insurance companies are in a much better negotiating position than private buyers, because they’re dealing in bulk, so their expenses are based on paying much lower prices for services than their members would get if they bought individually.
Other commenters have already addressed the difference between expected utility and expected monetary return, but in fact having insurance can have a positive expected monetary return simply because you’re forced to pay more when buying the services privately.