For example, when we insure people against costs of a care home in old age, the care homes typically overcharge us so as to subsidise the non insured who can't afford to cover the true cost.
Also, in some cases we can negotiate discounts so even when we take our profit it still works out cheaper for the average customer (mainly healthcare if you look at private healthcare alternatives to insurance).
The other problem is that people who lie to insurers tend to get off lightly now. The current rulings are such that if you committed fraud, but it wasn't directly relevant to your claim, you get away with it.