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To: Tommaso who wrote (160334)	10/26/2008 7:20:06 PM
From: Jim McMannis	Read Replies (2) \| Respond to of 306849

RE:"I dislocated my shoulder in bed at 2 a.m." OK, I'll bite. How did you dislocate your shoulder in bed at 2am? The possibilities are wondrous.

To: Tommaso who wrote (160334)	10/26/2008 7:48:40 PM
From: neolib	Read Replies (1) \| Respond to of 306849

Insurance should provide only two fundamental functions: 1) Risk averaging of expensive but unlikely events across multiple at risk parties, i.e. the events are only going to hit some of the parties, not all of them, but when they hit, the expense is too great to handle by individual parties. 2) Conversion of rarely encountered larger payments to more frequent (typically monthly) payments, which has utility even if the risks are expected to hit a single party and are financially within the parties ability to pay. Note that the hit might come prior to your payments covering the cost, so insurance can front the cost. In exchange for these two functions, a payment penalty is extracted (the insurance company must make a profit, and has overhead). It is vitally important to understand that 1 & 2 only work IF everyone expecting to benefit is also enrolled, so the actuarial computations used are valid. You can't for example have tables based on 20 year olds starting to pay to cover their old age illnesses, then allow non-members to jump in at 50, such as another poster here seemed to imply with his comments about young men not needing insurance. If for some reason, 1 & 2 are not of interest, then self insure, it is economically wiser. Just make sure that lack of interest is not due to lack of intelligence! The vast majority of Americans, and AFAIK most our politicians, confuse insurance with two additional issues: a) Wealth transfer. b) Cost of service containment Unfortunately, a & b are what people focus on, when they need to understand that insurance is fundamentally about 1 & 2, while a & b might be better dealt without outside of insurance. Decouple the functions and attempt to address them optimally. It is always possible that combining a & b into the same entity that handles 1 & 2 has some advantages, but this needs to be clearly determined, and not assumed. There are clearly some great risks in combining them, because it decreases transparency of the distinctions in function which leads to muddled thinking. Unlike bentway, I don't think the government per se has a lock on doing 1 & 2 optimally, while it might do best at a while for b perhaps a combination of government and private action might work best.