In order for insurance companies to generate predictable payouts, they need to:

Question

Quizplus · Accepted Answer

By spreading the risk across many policies, insurance companies can ensure that they receive a predictable amount of premiums and can then use this money to pay out claims when they arise. This is the fundamental principle of insurance and allows companies to manage their risk effectively. Accepting policyholders from a very specific geographic area or focusing on insuring only specific events would limit the number of policies available and could lead to unpredictable payouts. Offering only life insurance would also limit the number of policies available and could be risky if there were a large number of payouts in a short period of time.

In Order for Insurance Companies to Generate Predictable Payouts, They