Yep. Similar to healthcare, the model will need to change in order to protect people from catastrophic losses while allowing them to self insure up to a level they can afford. The system already allows this (provided you have equity in your home), and smart people in high risk areas will begin to take advantage of it.
I've long wished I could buy a healthcare policy that was primarily directed at catostrophic type expense - my feeling is that, expensive as meds are, I'd probably spend less on them than on insurance.
But my belief is that health insurance would likely be cheaper if government would restrain itself from distorting the market.
Milton Friedman has a nice essay on healthcare and insurance that is widely available on the net.
My wife has a pre existing condition that no insurer wants to touch, just about impossible to buy insurance for her. I still don't think it's the state's place to be selling insurance, not being a believer in socialized medicine.