Car and homeowner's insurance only works /because/ insurers have imperfect data /and/ because purchasing it is mandatory in most cases This is not true and rep

Car and homeowner's insurance only works /because/ insurers have imperfect data /and/ because purchasing it is mandatory in most cases This is not true and represents a misunderstanding of the purpose of insurance. Insurance exists to protect against large downside risks. There is, let's say, a 1% chance that my apartment burns down next year and I lose $50,000 worth of stuff. I would much rather pay $500 to insure against this loss than run the risk. I can easily afford to pay the small insurance premium whether there is a fire or not, but a fire would put a very serious strain on my finances that I am very happy to avoid.