When states make car insurance mandatory for all drivers, it:
A) raises rates for everyone because it brings bad drivers into the pool.
B) raises rates for high-risk drivers.
C) may lower rates for all drivers to the extent that it keeps low-risk drivers in the pool.
D) prevents high-risk drivers from "selecting out," to the detriment of low-risk drivers.
E) increases the amount of information available to insurers about the population.

Question

Quizplus · Accepted Answer

When car insurance is mandatory for all drivers, it keeps low-risk drivers in the pool, which can potentially lower rates for everyone. By spreading the risk across a larger pool of drivers, insurers can better predict the likelihood of accidents and injuries, making it easier to set rates that are fair to all drivers. However, it may not necessarily raise rates for high-risk drivers, as they are already considered a higher risk and may be charged more regardless of whether insurance is mandatory or not.

When States Make Car Insurance Mandatory for All Drivers, It