Lots of different businesses operate on terms far more complex than your simplistic understanding of capitalism. First of all our economy isn't strictly free market capitalism. No such economy exists in the world. All organized economies operate in a regulated market one way or another. Insurance is particularly different as you are not simply selling a product. The idea is that people pay money in to a pool that exists to cover expenses that come as a result of an uncommon adverse event. For auto insurance this is generally accidents. Most people will pay into insurance and not have an auto accident that costs a lot of money. Some people will. This is essentially spreading the risk over lots of people so that individuals do not bear the burden of rare costly events. Therefore insurers have to charge enough to have enough money on hand to cover claims for damages or injuries. Most states ( or at least some) require auto insurance to cover the medical bills of people injured in auto accidents. If the pool of insured people are not wearing seatbelts then the number of injury claims will rise. Thus insurers have to charge everyone more to balance the books. It's all about spreading risk. Mandating seatbelts is a minor intrusion on one's freedom for the sake of benefiting everyone.