If you hyper-specialize the risk pools it effectively prices lots of people out of the market, causing their risk pools to collapse. Insurance also loves to wri

If you hyper-specialize the risk pools it effectively prices lots of people out of the market, causing their risk pools to collapse. Insurance also loves to write exclusions if they aren’t prohibited. By your logic health insurance should exclude sickle-cell anemia coverage for black customers. For insurance to work as intended, it has to be spread across a large population and it needs to cover a wide variety of perils. Where insurance can be a force for societal good it should be allowed to discriminate. For example, insisting on better fire safety. Or basing your car insurance rate on your car’s safety rating. P.S. Insurance works by making money off the float, not by collecting more in premiums than they pay out. The expected payout is around 100% over the long run, but the payout happens over time. Until it does, the insurance company holds the money and uses it to make money. (Granted, in this low-interest-rate environment insurance companies may set the payout ratio a bit more favorably since the float makes them less money, but competition effectively helps keep a cap on that). Mutual insurance companies (owned by their policy holders) are different. Any profit of a returned to the policy holders, so there’s no incentive to set rates higher than required. However the tragedy of the commons kicks in: if they offer lower rates to high-risk groups, they tend to attract the worst of those groups, causing higher losses - especially with health insurance. That’s part of the reason government regulation of insurance is the way it is, the other being gross mis-management causing insurance companies to go bankrupt and be unable to pay out during times when people need it the most.