The foundational principle that makes insurance companies work is called:
A) risk pooling.
B) risk assignment.
C) catastrophic causation.
D) risk analysis.

Question

Quizplus · Accepted Answer

Risk pooling is the practice of spreading the risk of loss among a large group of people by pooling premiums and using the collective resources to pay for claims. This allows for the cost of potential losses to be spread across the pool, making insurance more affordable and accessible to individuals who might not be able to bear the full cost of these potential losses on their own. Without risk pooling, the cost of insurance would be too high for most people to afford, and insurance companies would not be able to function effectively.

The Foundational Principle That Makes Insurance Companies Work Is Called