Insurance companies can reduce risk by accepting premiums from

Question

Quizplus · Accepted Answer

Insurance companies reduce risk by accepting premiums from many people to insure against independent events, as these events are unpredictable and can happen to anyone. By pooling together premiums from a large number of people, insurance companies can spread out the risk and ensure that they can pay out claims to those who are affected by the events. Few people (option B & D) would not be sufficient to reduce the risk adequately, and insuring against dependent events (option C) may not be financially feasible for the insurance company as the events are predictable and can lead to a high probability of claims.

Insurance Companies Can Reduce Risk by Accepting Premiums from