the issuer is betting that the applicant won't suffer a
loss, the applicant is betting that he will. An actuary
sets the rate based on his best guess about the
possibility of a claim.
Emphatically: no! The issuer is betting that in the entire group of clients the total loss will be smaller than the rates they set. Almost nobody can ever financially deal with the greatest risk health insurance insures against. Health insurance is almost never about amortizing your own risk. It is about insuring against risks you couldn't possibly deal with otherwise. Almost nobody can pay for a long stay on the IC after an accident, with months of rehabilitation afterwards. When you need the insurance, it's the money of the other clients, that with hindsight never needed the insurance, that pays for your costs.
Of course obligatory health insurance is pure socialism (not in the pure 'political movement' sense of the word, but in the 'common usage' sense of the word, meaning forced sharing of a population's resources for a specific greater good) and thank God for it. I'll take my Western European social democracy over your government any day. I gladly pay taxes to have it this way.
> When you need the insurance, it's the money of the other clients, that with hindsight never needed the insurance, that pays for your costs.
This is the normal approach, but it's a coincidence -- the insurance system doesn't collapse if it's not the model. Insurance can equally be a case of one policy, one client, all depending on what's being insured -- see below.
> Emphatically: no! The issuer is betting that in the entire group of clients the total loss will be smaller than the rates they set.
My point is that system works with one client the same way as with 10,000. It's a matter of accurately assessing the risk of a claim. Insurance doesn't suddenly stop working because there are few clients or only one client.
Multiple clients is the usual case, but it's not required for the system to work. Large insurance houses will very happily write a policy that only applies to one person:
A quote: "America Ferrera is the newest addition to the list of stars who have some of their body parts insured. Famous for her role as Betty Suarez in the top-rating ABC sitcom "Ugly Betty", Ferrera has had her smile insured for 10 million dollars by Lloyds of London."
No, Lloyds of London have huge numbers of clients. There is not one person / group of people who will personally lose a huge amount of money if that pays out. The money will come from someone else's car insurance not paying out.
Of course obligatory health insurance is pure socialism (not in the pure 'political movement' sense of the word, but in the 'common usage' sense of the word, meaning forced sharing of a population's resources for a specific greater good) and thank God for it. I'll take my Western European social democracy over your government any day. I gladly pay taxes to have it this way.