The approach to the limit is not often smooth, and the cost of insurance is not continuously reevaluated, so this is not an appropriate model for those situatio

The approach to the limit is not often smooth, and the cost of insurance is not continuously reevaluated, so this is not an appropriate model for those situations in which insurance is actually the answer. There are, however, situations where the model is a reasonable fit - notably, some aspects of health care, where the approach to the limit proceeds over multiple billing periods. A society can choose to spread the cost around, but to do this under the guise of insurance leads to the sort of incongruities and inefficiencies that are seen in the US system.