&gt; The expected value of insurance is not automatically negative.<p>I&#x27;m curious how this math works. In my (quite likely incomplete) mental model of insurance, there are only a few terms: premiums, payouts, profits. It would seem that they have to balance. So if you pool risk, you are summing the payouts. Those payouts are covered by the sum of premiums. Any profit is the sum of premiums minus the sum of payouts.<p>Profits = Premiums - Payouts<p>Is this right so far?<p>Because then it seems that the expected value of insurance to the customer is the negated value of the expected profit of the insurer. Put another way: if the expected value of insurance is <i>not</i> negative, shouldn&#x27;t the insurer raise premiums or exit the business?<p>Again, I know next to nothing about insurance and I&#x27;m asking to learn.