[thstone]

Insurance is based on aggregate risk and not based on what any certain indidual paid in during a length of time or what the insurance company paid out for an accident.

Each of us are placed into a risk group based on factors such as age, driving history, location, value of car, car model, etc. Then each of us pays what the insurance company calculates (based on historical actuals for each risk group) to be our "share" of covering ALL of the claims. Those participants who are placed in higher risk groups pay a higher share of the total and vice-versa for the lower risk groups. Over time and over a large number of participants, the number of accidents is fairly stable as are the total cost of claims so it becomes fairly easy for an insurance company to estimate the cost of insurance to an individual.

Thus, it is generally irrelevant whether any single person has paid in enough over time to cover their particular claim. We all cover some amount of all of each others claims!

Alternatively, we could all be "self-insured" where we pay into our own personal fund and pull from that fund when we need to pay a claim. However, that would require each of us to pay in at a very high rate so we could each cover the worst case claim.

Generally, it is much cheaper to "share the risk" among a larger number of participants since the odds of an expensive claim is fairly low. This keeps the amount we have to pay lower yet still provides each of us worst-case coverage.

This is why insurance, as most of us know it, exists.