Insurance: the practice or arrangement by which a company or government agency provides a guarantee of compensation for a specified loss, damage, illness or death in return for payment of a premium.
Spreading Risk: the extent in which an insurance company by selecting DIVERSIFIED and INDEPENDENT risks that are fairly uniform in size and sufficiently large in number, can predict the losses thereon with reasonable accuracy by the law of averages.
History: the concept of insurance can be traced back to Mesopotamia and the Code of Hammurabi c. 1750 BC (a code of laws). It was a Babylonian practice that was used by merchants who delivered goods on boats. A merchant would purchase a shipment and pay an additional sum of money in order to guarantee the loan would be canceled, should the shipment be lost at sea.
As we continue this journey of the repeal and replacement of the Affordable Care Act, we need to keep in mind, the way insurance works is when EVERYONE is involved in the risk, not a specific subset of people. When comments are made that it is not fair for a young person to pay into a system to subsidies for someone who is older and perhaps sicker, we are missing the point. It is insurance and it is there should someone encounter a loss and it is there to protect you from financial ruin should that loss be catastrophic.
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