An automobile insurance company that writes millions of policies is practicing a form of:
A) mutual fund.
B) hedging risk.
C) spreading risk.
D) eliminating systematic risk.

Question

Quizplus · Accepted Answer

The automobile insurance company is practicing spreading risk by distributing the risk among a large number of policyholders. By doing so, the company reduces the impact of any individual loss or claim and can provide coverage to a large number of customers. Hedging risk and eliminating systematic risk are not applicable in this scenario, and a mutual fund is a type of investment vehicle, not a form of insurance practice.

An Automobile Insurance Company That Writes Millions of Policies Is