Because the viability of the industry is predicated on the vast majority of consumers losing money on their premiums. Insurance isn't a bad idea intrinsically, but it's a bad thing when the industry is turning billions of dollars worth of profits

Specifically, people are being persuaded to outsource risk at a steep premium rather than much more cheaply self-insuring themselves by laying aside less money regularly, or by accepting much higher deductibles. In order to increase sales, unnecessary products proliferate.

And the risks are exaggerated to induce as much fear of loss as possible. The entire industry is built on fear of loss.

Yes it's odd - even re relatively small losses. It's almost as though we're buying excess predictability, not being emotionally disturbed by losses we can absorb more easily than the premiums, often; but we aren't emotional about paying them.

Above should read: "preferring not to be emotionally disturbed"

Insurance companies generally pay out more in benefits than they collect in premiums.

I'm deeply skeptical of that given the huge profits posted by insurance companies.

There's 2 parts to this: the actual 'pay out claims' part which is the expense ratio, and then the part where the insurance company makes money off of the giant pile of cash they're holding before re-paying it to claims. I am not well-aware of ratio regulations (some amount per-state do exist) and generally their investments are quite conservative.

My source is having done investment in and diligence on a couple insurance companies (which I've since sold.)

You make a very good point, it had completely slipped past me that they can make investments with that big stack of cash they're collecting from customers.