[Joeri]

Insurance is still insurance even if everyone pays equally into the system. The underlying principle of insurance is spreading risk to lower average cost. You can bill everyone the same amount and still have such a model. What you must mean is that social insurance isn't priced like commercial insurance, and that is true, but it makes sense to do it that way.

Commercial insurance tries to give least protection to those most at risk, to produce a higher profit margin. Social insurance tries to give maximum protection to those most at risk, to achieve some sort of ethical goal. Or in other words, commercial insurance is a form of business, social insurance is a form of charity. That's why social insurance costs least for those with the highest risk, and why commercial insurance is priced the other way around. They're still both insurance, just priced based on a different theory.

This difference is also why a commercial model of insurance can never be used efficiently for a social system (such as pensions or healthcare). Competition forces insurers to lower their prices, but the only way to do that and maintain profit is to lower pay-outs. How do you lower pay-outs? (1) provide less service to those that need it more, or (2) raise prices on those that need it more (risk-based billing, as you propose). The logical conclusion of that is that many of those that need protection are unable to afford it. That's not a "social" system. Social insurance is a charity, not a business.

[yummyfajitas]

Insurance is about pooling risk to allow people to reduce the variance/value at risk/etc of their costs, while holding the expected value of their costs constant.

You are describing a forced redistribution scheme, which perhaps devotes a slim minority of it's revenues to insurance. It's deceptive to describe such a scheme as insurance - you might as well describe the mafia as a pizza business, since a small amount of their revenues are laundered through a pizza shop.

You are also utterly mistaken about what charity is. Charity is the practice of benevolent giving. You are describing taking money from people by force and giving it to other people.