Page 13 - Life Assurance

/2 Insurance and gambling are exactly
opposites (why insurance is not gambling?):

It is common to confuse insurance, with
gambling, for to many it is difficult to see clearly
why insurance is not gambling.

Insurance may appear to be a contract
under which there is a possibility for the
insurance company to pay to a given part a great
deal more than it has received in premiums, but
this does not mean that insurance is thereby a
gambling contract.

In fact, from an economic standpoint,
gambling and insurance are exact opposites.

Gambling creates a new risk where none
existed before, whereas insurance is a method
of eliminating or greatly reducing (to one party
anyway) an already existing risk. This may be
illustrated as follows:

Ehab said to Ashraf “I'll bet you 5,000 pound to
only 50 pound that Samy's house will not catch fire
within one year”.

If Ashraf takes the bet, a new risk has been
created for each person. If the house burns, Ashraf
wins 5,000 pounds, but if it does not burn, he loses
50 pounds. Before the gamble, neither party had
any risk of losing any money from this source, nor of
course, of gaining any, after the gamble each party
becomes subject to a new risk of loosing money.

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