The price of an insurance product is divided in 4 parts, the risk, the actuarial adjustment, administrative and distribution costs, and return of capital.

Nah nah nah; Insurance is like preem gammbling.

For example insurance companies couldn't pay everyone back after Hurrican Katrina. First come first serve I guess. :P

To my understanding insurance companies isolate areas so if that area gets hit hard. The insurance company just files bankruptcy in the area and moves on..

You gamble with which bookie (insurance company) you choose. You gamble when you choose where to live. You gamble how fast you can make your insurance claim. This shit is gambling through and through. And we ("The Common Person") are getting fleeced.

From the buyers point of view it reduces risk, so it is not gambling for them.

However it is gambling from the point of view of the underwriters.

(I am assuming both sides play fair and pay out when they should)

From the buyers point of view I agree it is risk reduction. But it is gambling from the sellers point of view.

IMHO we need peer to peer prediction markets, in which the insurance company is not the same party deciding who won the bet. Then your risk of denial would be more clear up front.

I don't even know that I should refuse jobs that offer insurance through UnitedHealthcare until Luigi.