Insurance significantly reduces the possible (or significantly likely) variance in a persons financial well-being. This comes at a cost in total wealth that is worth while because it brings the chance that one would vary into territory where the money one has is not enough for basic utility. Insurance on the other hand increases the variance (meaning the slight increase in expected value comes at a cost) at the other end of the spread in a way that does not guarantee any kind of minimal utility. Minimal utility is more important than huge potential diminished returns.