Final answer:
The fine for failing to maintain auto insurance can vary, so a general explanation of insurance premiums and how they work is provided. If 100 drivers each pay $1,860 yearly, $186,000 is collected to cover costs for accidents. This demonstrates the importance of pooling resources in an insurance model.
Step-by-step explanation:
The fine for a first offence of failing to maintain auto insurance varies depending on the jurisdiction, but the question presented does not include specifics about the fine amount, thus a general answer highlighting the importance of carrying auto insurance is provided. Discussing the concept of insurance premiums, if each of the 100 drivers pays a premium of $1,860 annually, the insurance company will amass $186,000, which is allocated to cover the costs associated with the accidents that occur among those insured drivers. This example demonstrates how insurance is designed to pool resources from many to pay for the losses of a few, stressing the need to maintain auto insurance.
A simplified but pertinent illustration of how automobile insurance works is to consider splitting 100 drivers into three risk categories. In one year, 60 drivers might experience minor incidents with repair costs of $100 each, while another 30 have moderate accidents costing $1,000 on average, and 10 sustain major accidents with costs of $15,000 each. Without the ability to distinguish the risk levels at the beginning of the year, the total damages within this pool would be $186,000.