Risk pooling occurs when:
A) people organize themselves in a group to collectively absorb the cost of the risk faced by each individual.
B) people organize themselves in groups according to how risk-averse they are.
C) people organize themselves in groups according to recognizable characteristics.
D) companies organize individuals into groups according to how risk-averse they are.

Question

Quizplus · Accepted Answer

Risk pooling is a strategy of organizing individuals or groups to collectively absorb the cost of risk faced by each individual or member. It spreads the cost of risk among a larger group, which reduces the financial impact on any one individual. This enables individuals or groups to access insurance at a lower cost.

Risk Pooling Occurs When