Maybe that's what insurance should be. It doesn't seem to be that way now. People build large fancy homes or fancy cars and then off load the risk to insurance. The problem with this is that it tends to increase costs for other in the pool and disincentivizes risk mitigating behavior. If I know that insurance will pay out for my car, then I can drive more aggressively. I want my home to look fancy and be huge instead of being built to survive local natural disasters, but that preference might change if I didn't have insurance.

I get what you're saying, though it is nuanced. For example, no insurance company in its right mind would insure a home in San Francisco against earthquake damage if the home isn't actually built to code in terms of its ability to withstand earthquakes. Similarly, car insurance companies charge way higher premiums for drivers with a history of accidents and tickets for reckless driving.

My point being, yes insurance obviously decreases risk for owners, but since insurance companies are the ones inheriting that financial risk, they also inherit the incentive to ensure that things are being done the right way.

Not really. It does when it comes to stuff like code. But none of that address the larger and fancier homes than if they were not insured. Similarly, if other people are buying much more expensive cars, your liability insurance will increase even if your risk stays the same - the likelihood of occurrence is the same but the cost per occurrence is higher.

Consider life insurance. It's about providing for widows and orphans. Before there was insurance, there were mutual aid societies, because it was very important to society to hedge that risk so that people aren't destitute after an accident.

There's social security as well.

I do not think inequality is unjust. Everyone can't have the same thing, it's a fundamental truth of the universe.