[SilasX]

That ... still makes no sense. "Discounting insurance for revealed [lower] risk class" doesn't work if the insured can easily fake membership in the lower risk class, which is trivial here -- just ask for comprehensive!

What I think you might be confusing this with, is that one piece of the insurance is cheaper if you bundle it with others. That is, liability-only might be $50, but if you if you get liability + collision, it's $80, which breaks down into $40 for liability and $40 for collision. The insurer is taking more liability -- but also more revenue, so no funny business.

The "high-risk poor" can't "cheat" here because they can't afford the extra $30 to begin with, and "being willing/able to spend $30 just to be safe" is an actionable signal of being low risk.

But you still shouldn't have a scenario where you get strictly greater coverage for strictly less money.

[Kinrany]

There's also a scenario where only people who don't look at prices buy liability-only, which signals poor decision making or carelessness and justifies higher cost to regulators.

[lotsofpulp]

The phrase “not looking at prices” generally means willing to buy the more expensive products or services. If you buy liability only, it means you are looking at prices and coverage.

[lotsofpulp]

This makes more sense to me.