Final answer:
The original question about the costs of DUI crashes in New Mexico cannot be addressed with the provided information. Instead, we explained how a group of 100 drivers paying a $1,860 insurance premium annually could collectively cover $186,000 in accident damages within that year through the insurance risk pooling mechanism.
Step-by-step explanation:
The question posed about the costs of DUI crashes in New Mexico cannot be answered with the supplied information which focuses on how automobile insurance premiums cover accident costs. Instead, we can examine the given insurance situation to understand how pooling risk works and why insurance companies charge premiums.
In the example provided, a group of 100 drivers each pays a $1,860 premium annually. The costs of accidents for this group in a year total $186,000, calculated as follows:
- 60 drivers with minor damages: 60 x $100 = $6,000
- 30 drivers with moderate damages: 30 x $1,000 = $30,000
- 10 drivers with severe damages: 10 x $15,000 = $150,000
Adding up these costs gives us the total: $6,000 + $30,000 + $150,000 = $186,000. This is the amount needed to cover all the damages, and it is exactly the amount collected from the 100 drivers' premiums. Through these premiums, the insurance company ensures that it has enough funds to pay for the losses of the few, by spreading the cost among the many who purchased insurance. This is the essence of risk pooling in insurance.