No, it doesn&#x27;t.  Because I don&#x27;t get insurance coverage for a nominal fee like $1 per month.  I pay a non-trivial amount of money every month.  So in my mind, 90% of that is going towards the possibility that I&#x27;ll eventually make a rare claim (float), 5% is going towards administration, and 5% is profit.<p>I know those numbers aren&#x27;t right, but lets say that they are.  In that case, paying $100&#x2F;mo for insurance and not making a claim for 10 years there&#x27;s over $10,000 worth of loose money (more once you factor in interest!) sitting around that&#x27;s just for me because according to your analysis insurance isn&#x27;t risk pooling but risk smoothing.  So then I make a claim for the whole car, $20k.  Fine, half of that comes out of the money I already paid to them for risk smoothing, the other half should come from the future payments I&#x27;ll make to them for risk smoothing.  My rates should double in this case.<p>But most people don&#x27;t total their cars every 10 years, many people go their whole lives without ever making a claim.  So at the end, they might have paid $50k in self-insurance risk smoothing premiums that the company gets to just keep, that&#x27;s not right is it?  Clearly no.<p>So what people actually think is supposed to happen is that everyone pays about the same amount and some people get unlucky and make claims and that doesn&#x27;t get counted against them.  They&#x27;re all wrong, but that&#x27;s how insurance is sold so it&#x27;s understandable.<p>In reality I suspect that the breakdown of float, administration and profit is more like 30%, 30% and 40% which is why premiums can go up so much after you make a claim; you&#x27;re actually making almost no real contribution towards the float at &quot;regular risk&quot; insurance rates.  Of course this also neglects the risk pooling aspect.