Insuring people against a risk can make them take on more of exactly that risk
Once a cost is covered by someone else, whether an insurer, a bailout, or a guarantee, the person taking the risk has less incentive to avoid it. Economists have documented the pattern across fire insurance, deposit insurance, and healthcare: Kenneth Arrow's 1963 analysis of medical insurance helped formalize how shielding people from the cost of a bad outcome can change the odds of that outcome happening at all.