A group of farmers agreed that if any farmer suffered a property loss,the loss would be spread over the entire group.In this way,each farmer is responsible for the average loss of the group rather than the actual loss that each farmer sustained.Which characteristic of insurance is embodied in this agreement?
A)pooling of losses
B)fortuitous losses
C)risk avoidance
D)indemnification

Question

Quizplus · Accepted Answer

The characteristic of insurance embodied in this agreement is pooling of losses. This is because the farmers have agreed to collectively bear the losses suffered by any individual farmer, spreading the risk among the entire group. This is the essence of how insurance works, as a pool of insured individuals or entities collectively share the risk of potential losses.

A Group of Farmers Agreed That If Any Farmer Suffered