If insurance was just about pooling risk, an insurer that had perfect information about the future would pool everyone into a one-man pool and charge everyone the price of their damage for the year +1 cent for itself.
But that's not what would happen. You would still have insurance because what we really have is 8 billion people in the world (or 300 million in America or 10 million in your state or 1 million in your city or 500 in your neighborhood/village) and each person in that group of people derives some utility from other people in that group not having to pay full price for their broken roof, whether that's because when you go talk to your neighbor he's not complaining about his roof all day or because your neighbor is your doctor and you want him in the hospital instead of running around trying to fix his roof all day or sitting at home wet because he can't afford it. The total amount of that utility multiplied by how much money the entire group makes might be less or more than the price of roofs for everyone in that group.
So it's both. You're trying to discover the network of people (or create/convince that network, sometimes by threat of violence in the case of government-mandated insurance) in whose interest it is to redistribute their wealth to a given person.
I invite you to start selling an insurance product whose sales pitch is "You will get some utility from this product paying for other people's roofs!"
Is there some kind of theory of insurance they teach in business class where they explain this "discover the network" idea? It doesn't sound like the common definition of insurance at all.
I believe the perfect information case you say wouldn't happen is exactly what would happen. The only reason we have insurance is that perfect information is impossible in a chaotic world.
There are actually insurances that to some degree work proactively to reduce the risk of all its members in the pool.
My home insurance offer free pest-control, because they know that if this is neglected, it will cost a lot more for them. Plus, it will be hard to prove that it was a cause of the home owners neglect.
At the risk of getting political, (governmental) healthcare is another one, where regular checkups can save you thousands in repair. It might look like a subsidy but in the end it becomes a net-benefit for everyone in the pool.
Commercial insurances will also often pay for risk improvement works and assessments for their customers' businesses on the basis that it will reduce the incidences of claims and/or reduce the cost of claims if they do arise.
> At the risk of getting political, (governmental) healthcare is another one, where regular checkups can save you thousands in repair. It might look like a subsidy but in the end it becomes a net-benefit for everyone in the pool.
This is part of the theory behind the Affordable Care Act and its subsidies, in that the more people who have health insurance, the bigger and more diverse the pool, it becomes a win-win-win for insurers (bigger pool = good, more money, more customers, more profit) consumers (health insurance = healthier, better life) and the government and country overall (healthy population = better long term prospects for the country).
Of course, true universal healthcare programmes like the NHS simply abstract that away by removing the profit incentive entirely, cutting the insurers out of the equation and turning it into a more straightforward "the government pays for healthcare because a sick population is just a plain bad thing". It's as such not really a "risk pool" or "insurance" in any real sense, because the amount you pay into the system is completely disconnected from your risk of drawing out of it (and indeed, given the correlation of poor health and low income, likely inversely proportional).
But that's not what would happen. You would still have insurance because what we really have is 8 billion people in the world (or 300 million in America or 10 million in your state or 1 million in your city or 500 in your neighborhood/village) and each person in that group of people derives some utility from other people in that group not having to pay full price for their broken roof, whether that's because when you go talk to your neighbor he's not complaining about his roof all day or because your neighbor is your doctor and you want him in the hospital instead of running around trying to fix his roof all day or sitting at home wet because he can't afford it. The total amount of that utility multiplied by how much money the entire group makes might be less or more than the price of roofs for everyone in that group.
So it's both. You're trying to discover the network of people (or create/convince that network, sometimes by threat of violence in the case of government-mandated insurance) in whose interest it is to redistribute their wealth to a given person.