> Firstly, the entire port of insurance is to spread risk. If the the market for insurance is "too efficient" at determining who is high-risk and who is not, then it is no longer fulfilling its social function.
Not necessarily! If you’re a physician, you have liability insurance against malpractice claims. If the insurer can correctly determine that you are a particularly incompetent physician and your premiums should be so high that you’re effectively just pre-paying the future settlements for your inevitable future malpractice cases, you will not be able to afford those premiums and will be forced to stop practicing medicine. In this scenario, the insurance market has satisfied its social function.
In principle, incompetent and unsafe drivers could similarly be identified and priced out of being able to drive, and the act of doing so would serve a purpose of making the roads safer for everyone else.
Not necessarily! If you’re a physician, you have liability insurance against malpractice claims. If the insurer can correctly determine that you are a particularly incompetent physician and your premiums should be so high that you’re effectively just pre-paying the future settlements for your inevitable future malpractice cases, you will not be able to afford those premiums and will be forced to stop practicing medicine. In this scenario, the insurance market has satisfied its social function.
In principle, incompetent and unsafe drivers could similarly be identified and priced out of being able to drive, and the act of doing so would serve a purpose of making the roads safer for everyone else.