This week we started a new project which purpose is to provide with a brand new system a company that deals with group health insurance. The new software will be a powerful management tool that will help our customers to boost their operational efficiency, which is already improving thanks to some non-software interventions.
While trawling for requirements during the first interview I realized that the business model on which insurance companies are based is just the opposite of the so called freemium model, in which a few paying customers (tipically about 10% of the whole population of users) subsidize many non-paying users. Paying customers are not just giving their money away though (if anybody is seriously interested in that, they can immediatly contact me and I'll be glad to help them right away), as in return for their money they get premium features not available to normal users.
Insurance is just the opposite: many customers (actually every customer) regularly pay premiums that subsidize a small fraction of users. The premium feature in this case is the (possibly partial) payment of potentially very expensive health-related bills that maybe would not be affordable by a single person: when someone claims for damages which are included in their coverage policy, the company pays.
Health insurance is then a form of risk reduction for policy holders, even if unluckily it does not reduce the risk of getting ill; on the other hand, it is a sort of a gamble for insurance companies, that bet they will collect more money than they will have to pay. Naturally it is just like gambling in every casino: it is virtually impossible to break the bank, as the premiums are based on all the odds that we could possibly think of and even more. Plus a considerable profit margin, of course :-)