To your utter dismay, your 16-year-old son passed his driver's education course and scraped together enough cash for his own car. You gave your blessing and called your car insurance agent to add this to your car insurance premium. Then you go into shock.
How can the insurance cost as much as the car he bought? Answer: Risk.
The car insurance company looks on you as a collection of risks. Your sex, your age, your marital status, driving record, type of car and place of residence all contribute to an insurer's prediction of whether you'll file a claim.
A car insurance company does not know what kind of driver you are. They can only guess, based on the accumulated statistics for drivers like you. Even if you're a stellar driver, if you happen to be young, single, male, and own a sports car, the insurer is probably going to place you in a category with a high premium - or it may reject you entirely.
There is some good news. Not all car insurance companies price risks the same. While insurers are highly regulated in many states, they still operate as competitive businesses, focusing on certain markets and avoiding others. What's more, some operate their businesses more efficiently than others, passing on the savings to consumers. So shop around!