What is the fundamental function of the insurance company-in other words, what is it the insurance company does that makes the insurance mechanism work?
A) It pools those insureds having similar risks, and predicts the losses that those in the pool will suffer.
B) It pools any insureds who wish to purchase insurance, and attempts to predict the losses that those in the pool will suffer.
C) It redistributes government subsidies to those who have suffered catastrophes.
D) It eliminates the process of underwriting in order to sell insurance to as many people as possible, thus providing insureds with a huge quantity discount.

Question

Quizplus · Accepted Answer

The fundamental function of the insurance company is to pool those insureds having similar risks and predict the losses that those in the pool will suffer. This allows the insurance company to calculate premiums that are sufficient to cover losses while providing affordable insurance to its customers.

What Is the Fundamental Function of the Insurance Company-In Other