I was reading about how the original firemen actually started out from an insurance company that grew to take over a whole town to manage their risk. Soon they realized spreading the risk to other towns and every citizen made more sense for everyone.
There are 4 different ways society deals with financially hedging a disaster.
Public Services, Insurance, Options, and straight up Gambling.
Let’s say you are a farmer who depends on selling your crops to make a profit. But you are concerned your field may catch fire before you have a chance to sell. How do you protect against this?
Public services
You pay a tax to the town that funds a 24 hour fireman service. Every citizen contributes.
Insurance
You pay an optional fee to get the value of your crops if the worst happens. You opt-in to contribute yourself. Others who worry about the same thing contribute too.
Options
There’s a market for future events like weather that causes fires or even your specific crops. You can hedge the value your crops would have sold for along with your actual crops. Speculators also buy in hoping to make some money as well as banks and hedgefunds hedging some specific part of their investments.
Straight up Gambling
You just bet there is a fire. You find a future market website (not strictly legal everywhere) and place your bet.
The more a society grows, the more things that start out as gambling may eventually become more formalized and may even become a public service. Health insurance in many countries is a public service but still just insurance in the USA for example.
Some ideas may grow from offering it in another market.
What would happen if groups of people’s life insurance was on an option market? Could an insurance company create a profitable policy rolling a 00 on a roulette table?