Don't all these plans suffer from the "small loss" problem?
...
And it gets worse. If you buy insurance, not only are you paying more than you would without insurance, you also have to deal with claims adjusters to get your claim paid. And you have to follow their rules and use their "preferred providers," no matter your preference.
So do i think all insurance is dumb. Not at all. For large potential losses, such as liability, insurance is a good idea because such losses can wipe you out. It is worth the extra cost and hassle to make sure you don't get wiped out. (In the case of liability insurance you also make sure you have the resources to take care of people you harm, which seems to me like something we should all do).
But what about "small loss" risks like getting a tire dealt with. These won't wipe you out - it may be hard or painful to pay out of pocket, but you should be able to pay if you can afford the insurance. Put your premiums in the bank and over the course of your life you will do better than being insured for small risks.
I completely agree with your analysis as it applies to insurance. I always, for example, take the largest available deductibles, and drop all non-required insurance on older vehicles.
However, when it comes to roadside assistance, it is not obvious to me that the same logic applies. In fact, I am not even sure that these services are really even best thought of as "insurance". Rather, they are more like prepaid logistical services--the value is less in any hope that money is "saved" over time (as you say, it probably isn't). Rather, you are paying for rapid access to expertise in getting your problem solved when you are stranded on the side of the road in a strange part of the country. You can't really buy this
a la carte, and it is very valuable when you need it.
There are other considerations as well:
1) It isn't really a zero-sum game in the way that most insurance is. This is because the providers are able to negotiate substantial discounts with the local towing companies that actually do the work. They pay much less than you do, so it is possible to be win/win.
2) The economics are favorable to "frequent RVers" -- lots of people pay for these services year-round, but only travel for 2-weeks every summer, if that. This keeps the price down for those of us who travel much more, and thus get more value from the coverage. (This is true to some extent for most insurance, but I suspect that is much more extreme in this case).
3) If you buy towing coverage from your car insurer, the prices tend to be very low. I think that this is for two reasons: (a) I suspect that these offerings are managed as "loss leaders", rather than profit centers; and (b) Many people carry redundant coverage--they sign up for these things because they are cheap, but also sign up for AAA, because dad did so and it has become a religious obligation. Also, most new cars come with redundant towing coverage for several years.
4) Not all the risks covered are small. Changing tires is one thing, but a 1000 mile tow to Anchorage is quite another. That is why inferior RV coverage such as that offered by AAA is such a poor value compared to quality plans with unlimited towing. Again, most people don't subject themselves to such risks, but lots of us do.
So, in summary, I strongly agree with your point re insurance, but roadside assistance programs are arguably a different animal.
