Because most insurance companies insure many people, they do not have to worry about the problem of:

Question

Quizplus · Accepted Answer

Insurance companies can spread the risk among a large pool of policyholders, reducing the impact of any single claim on their financial stability. This is why they do not have to worry about the problem of spreading of risk. However, moral hazard, adverse selection, and information asymmetry are still potential problems that insurers have to address.

Because Most Insurance Companies Insure Many People, They Do Not