Because most insurance companies insure many people, they do not have to worry about the problem of:

Name: Because most insurance companies insure many people, they do not have to worry about the problem of:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Insurance companies are able to spread the risk of loss among many policyholders, which helps to mitigate the impact of any individual loss. This reduces the need to be concerned about adverse selection or moral hazard, and also helps to mitigate the effects of information asymmetry.

Because Most Insurance Companies Insure Many People, They Do Not