Question

Discuss in detail why gambling losses are not insurable events.

Answer 1

Insurance and gambling were considered alike because there is an uncertainty of events and payment is made when the event occurs.

Reasons for why gambling losses are not insurable events:

1) Gambling creates a speculative risk and insurance is used to handle already existing pure risks; gambling is usually socially unproductive, as in one person's gain is at the expense of another, and neither the insured nor the insurer experience a loss at the other's gain in insurance.

2) Gambling losses are not insurable events because the gambling contracts are void as per the law and even utmost good faith is required to be exercised in insurance contracts whereas, it is not applicable in gambling contracts, hence they are not insurable events.

3) Normally in the insurance contracts we will know which party is immune from loss but in gambling we will not know which party is going to win or lose.