There's another, more direct reason: insurance is only supposed to allow you to 'hedge out' risks that you already have, whereas gambling or speculation is unrestricted.
In the case where your house burns down, you're 'rewarded' in the insurance contract, but you should be close to net indifferent (after insurance) over whether your house burned down or not.
That's why we don't let people buy insurance on other people's houses -- it creates a perverse incentive for the insurance purchaser to force a certain outcome.
In the case where your house burns down, you're 'rewarded' in the insurance contract, but you should be close to net indifferent (after insurance) over whether your house burned down or not.
That's why we don't let people buy insurance on other people's houses -- it creates a perverse incentive for the insurance purchaser to force a certain outcome.