> It's true that the buyer has negative expected value money wise and the seller positive one...
This is obviously the insurer's goal, but in practice competition and relaxing underwriting standards to win business means that many insurance companies do not turn an underwriting profit (the buyer winds up with a positive expected value). But premiums are paid up front and payouts to policy holders do not occur until later, and the insurer can invest the "float" in the meantime, so they still make money.
Obviously the customer could have taken the premiums and invested them themselves, but that also takes time and effort, and may come with risk itself. It is not obvious that insurance is a bad deal even ignoring arguments about the concave nature of the utility of money.
This is obviously the insurer's goal, but in practice competition and relaxing underwriting standards to win business means that many insurance companies do not turn an underwriting profit (the buyer winds up with a positive expected value). But premiums are paid up front and payouts to policy holders do not occur until later, and the insurer can invest the "float" in the meantime, so they still make money.
Obviously the customer could have taken the premiums and invested them themselves, but that also takes time and effort, and may come with risk itself. It is not obvious that insurance is a bad deal even ignoring arguments about the concave nature of the utility of money.