[michaelt]

  How is it better to pool risks to the group rather
  than the individual paying a for that risk?

Imagine a population of 10,000 people, 1000 live in fire-prone areas, and 10 will have their $100,000 house destroyed by a wildfire for a total cost of $1,000,000.

(1) If the state pays for wildfire damage, the 10000 people will pay $100 each whether they're in a fire-prone area or not.

(2) With home insurance including wildfire insurance, insurers set individual premiums based on their best risk models, and the 1000 people in fire-prone areas will pay $1000 each, whether their home burns down or not.

(3). If there is neither (1) nor (2), the 10 people whose houses were destroyed will pay $100,000 each.

Some people would say that (2) is the morally correct level of cost distribution, as (1) unfairly subsidises risky behaviour, while (3) bankrupts disaster victims at random.