Annoying anecdote: I interviewed for an entry-level actuarial position recently and, when asked about the purpose of insurance, I responded with essentially the above argument (along the lines of increasing everyone’s log expectation, with kelly betting as a motivation). The reply I got was “that’s overcomplicated; the purpose of insurance is to let people avoid risk”.
By the way, I agree strongly with this post and have been trying to make my insurance decisions based on this philosophy over the past year.
Annoying anecdote: I interviewed for an entry-level actuarial position recently and, when asked about the purpose of insurance, I responded with essentially the above argument (along the lines of increasing everyone’s log expectation, with kelly betting as a motivation). The reply I got was “that’s overcomplicated; the purpose of insurance is to let people avoid risk”.
By the way, I agree strongly with this post and have been trying to make my insurance decisions based on this philosophy over the past year.