Accurately pricing insurance doesn't reduce the size of the pool.
When you buy insurance, you aren't just pooling risk with other customers with the exact same risk profile as yourself. You're pooling with all customers of the company. (Plus all customers of any reinsurance company, etc.)
It's not being individually priced, people at higher risks are being forced out of their insurance options leaving only low-risk individuals priced in! Non-renewal isn't just some rate adjustment
It is just a very high rate if they could charge it, but that's the point: when the uncertainty is nil, the premium will always be the replacement cost when the replacement is about to happen, so that there's no insurance.
Put another way, if the insurance company isn't taking on any risk then you are.
