Disadvantages faced by insurance companies in bearing risk include administrative costs, adverse selection, and moral hazard.

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Administrative costs refer to the expenses incurred by insurance companies in managing and processing claims. Adverse selection occurs when a higher proportion of risky individuals are allowed to purchase insurance policies, increasing the likelihood of claims and losses for the company. Moral hazard refers to the tendency of insured individuals to take greater risks or engage in more careless behavior since they know they are protected by insurance. These factors can increase the overall risk and cost for insurance companies.

Disadvantages Faced by Insurance Companies in Bearing Risk Include Administrative