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Why have insurance markets succeeded where prediction markets have not?

Insurance is big business and is load-bearing for many industries. It has gained popular acceptance. Prediction markets have not. This is despite clear similarities between the two domains. One can list similarities: * You are trading financial contracts about the odds of real world events. * The market price of...

Jan 21, 2024•13

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JNank — LessWrong

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Why have insurance markets succeeded where prediction markets have not?

Jan 21, 2024•13

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Member for 4 years

Why have insurance markets succeeded where prediction markets have not?

JNank

JNank, PeterMcCluskey

Insurance is big business and is load-bearing for many industries. It has gained popular acceptance. Prediction markets have not. This is despite clear similarities between the two domains.

One can list similarities:

You are trading financial contracts about the odds of real world events.
The market price of a policy elicits and aggregates information about the forecasts of professional traders and this price can inform the publics' view of risk.
Insurance is a tax on BS (If one underwriter says to you "that policy you wrote, its a steal, that boat's never gonna sink" you can say "wanna bet?" and let them reinsure you.)

Or you can consider this extract from an official history of Lloyd's of... (read 242 more words →)

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Why have insurance markets succeeded where prediction markets have not?

JNank

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JNank

Why have insurance markets succeeded where prediction markets have not?