If insurers didn't practice pooling, what would happen?
A) They would save a lot of time and money by not having to do difficult calculations.
B) They would make a handsome profit since they would get to sell a lot of insurance to a lot of people.
C) The insurance mechanism would become unfeasible.
D) The insurance mechanism would become the largest money-making venture in the United States.

Question

Quizplus · Accepted Answer

Pooling is the practice of combining many different types of risk into a single insurance pool. Without pooling, insurers would have to assess and price risk on an individual basis, which would be both time-consuming and costly. This would make insurance unfeasible for most people, as premiums would be prohibitively high. Therefore, without pooling, the insurance mechanism would become unfeasible. Choosing A, B, or D would not make sense as none of those options are true.

If Insurers Didn't Practice Pooling, What Would Happen