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 Originally Posted by Savy
Do you think the principles behind buying in bulk & getting a discount apply to insurance in the same way?
Buying in bulk benefits due to efficiency gains in higher production and distribution. It's something like a factory can make 100 widgets at $10 a piece or 1000 widgets at $9 a piece. This type of thing happens for a variety of reasons that include specialization of labor and cost of machinery.
"Discount" to insurance comes when in a large, varied pool because the insurance company takes on less risk. Imagine one company that insures everybody who works at Microsoft versus another company who insures the same quantity of people but they all have diabetes. One of those scenarios is vastly more expensive for the insurance company and thus for the consumer.
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