Someone underwriting their own risk might as well not have actual insurance, as they’re just on the hook for actual damages correct?

So if they get sued for $1M, then they are on the hook for $1M (as an individual).

If everyone is sharing the risk, then everyone is on the hook for $1M/number of people.

So the individual that gets sued for $1M in a large state, might only be on the hook for a couple cents for their own lawsuit. Though they’d also be in the hook to the same degree for some other asshole getting sued.

Which is why insurance creates moral hazard (for things someone can control), and reduces catastrophic damage to individuals (for things someone cannot control).