I've been told that the golden rule of insurance is "insurance is cheap, when people who don't need it are buying it."
For example, let's say Nancy Drew has "getting hit on the head by a criminal" insurance. When she gets a concussion, insurance pays $5,000 for her hospital fees. If there are 50 people in the insurance pool, they all have to pay $100, to cover for Nancy's fees. If there are 100 people in the pool, they all have to pay $50. If there are 5,000 people in the pool, they all have to pay $1.
Basically, we need a lot of people who AREN'T getting hit on the head, to cover for Nancy. But say Frank and Joe Hardy join the insurance group. Now there are three people getting concussions, and everyone has to pay three times as much, in order to cover them.
Get the idea? People who use the insurance = higher cost per person. People who don't use the insurance = lower cost per person. Ideally, you could get such a large number of people in your insurance pool that prices would stay relatively stable, regardless of how often it's used. That's sort of how car insurance works. The car insurance company has millions of customers, keeping prices low.
Another way insurance companies keep costs low is by charging people on a sliding scale. That is, the more likely you are to need the insurance, the more you have to pay to get it. I remember in high school, when the guys spent HOURS complaining about the fact that they have to pay more for car insurance than girls do. Adults responded with condescending remarks about sixteen-year-old boys being reckless drivers. This led to the teenage boys complaining even more.
The sliding scale usually has a cut-off point, where it's not financially viable for someone to get insurance. Nancy Drew and the Hardy Boys are a good example. They get into dangerous situations, every single month! Each book usually has three to five scenes where they almost die or get killed. I wouldn't want them into my insurance pool, because they'd make my prices skyrocket!