Which of the following is one of the principles on which the insurance industry rests?
A)Trade in risk can produce mutual gains.
B)Diversification can increase risk.
C)Deductibles add to the problem of moral hazard.
D)There are no principles in the insurance industry.

Question

Quizplus · Accepted Answer

The principle that "Trade in risk can produce mutual gains" is one of the foundational principles on which the insurance industry is built. This concept of risk transfer allows for individuals and businesses to transfer financial risk to insurance companies, which then pool and spread the risk among their policyholders, resulting in a mutual benefit for all involved. The insurance industry also operates on other principles, such as the law of large numbers, underwriting, and rating.

Which of the Following Is One of the Principles on Which