Not sure I fully follow. Indeed in a way it's a gift to the industry to make insurance mandatory as it creates a bigger market. But there's no 'mandatory profit'. At the end of the day the world of finance is highly competitive, there's thousands of insurance companies. These are all pushing pricing down to the average costs of the loss events. The fact insurance is mandatory doesn't prevent that competition, if anything, it increases it, and through economies of scale makes it more efficient. I'd bet that ceteris paribus, the premiums for an insurance package for a large market are closer to the average uninsured costs than insurance for small niche markets.

Second, it's mandatory because otherwise the incentives don't really line up, especially psychologically, for a lot of people.

After all, the point isn't just to insure yourself, it's also to insure against damage to other property or bodies than your own. If you're poor, old, sick, and drive a worthless car, you wouldn't be so much incentivised to carry insurance to pay out damages when hitting an expensive car another person. It could very well be that without mandatory insurance you'd have all kinds of damages on the road that would never be compensated due to the financial situation of the driver.

> And yes--there will be the obligatory story about the uninsured driver, but 15k, 30k, 5k liability doesn't cover much. So little why mandate it?

You may say 'but it's a small amount so who cares', but that's a bit silly. Either make the argument that the premiums/coverage are too low, or too high, you can't do both. If it'd make sense for $300k coverage but not for $30k, then you'd have to be making the argument that minimum insurance premiums should 10x, not to go away completely.

Self-insure is no magic panacea. For one it typically involves putting up a bunch of cash in a no/low-return bond, typically averaging around 50k, which has opportunity costs (in the form of returns on investment) that aren't too dissimilar from just paying out an insurance premium. After all, if you take the S&P500 returns, cut it by 50% for good measure, you're still at 2.5k a year in opportunity costs, which is a multiple of the average annual car insurance in California.

This idea that rates would be halved comes completely out of nowhere, says who? Hell, insurance companies are de facto law firms, which take much of the headache of many claims out of your hands, and efficiently because it's their bread & butter, and with much more power. Not cheap or fun doing that yourself.

Insurance isn't perfect and the article's discussion on over-insurance is valid, but a lot of insurance packages (if properly negotiated) are actually quite competitive and efficient.

Where mandatory insurance completely sucks is differentiation. For example, if you drive 5% of the average rate, you're overpaying massively. If you're driving in a village with 5% the amount of traffic and lower loss probabilities, you're overpaying massively. But states with self-insurance suffers from the same issues lacking differentiation. It's at the end of the day a data issue you have to solve, regardless of whether you insure yourself or purchase insurance.