Question

The number one reason risk pooling is valuable to the insurance industry is... A. It allows companies to charge the same premium to all members of the pool. B. It brings together many individuals' premiums so that there is money to cover the select few with losses. C. It makes insurance coverage available to everyone, even those who are unable to make their payments. D. It is subsidized by the federal government.

Answer 1

The reason for risk pooling which is beneficial for the insurance industry is best described as it brings together many individuals' premiums so that there is money to cover a selected few losses.

Option B is the correct answer.

Who is a policyholder?

The policyholder is an individual who takes an insurance policy from an insurance company. He pays insurance premiums against their respective policies.

The insurance contract is an agreement between the individuals and insurance company to indemnify them at the happening of the specified event and individuals also agreed to pay the insurance premiums on time. The risk pooling allows the insurance company to get insured many people against a small amount of money called an insurance premium.

Therefore, risk pooling is valuable for the insurance company in respect of the insurance policies.

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