Without the insurance mechanism, the reserves needed for the economy to pay for losses would be much greater.

Question

Quizplus · Accepted Answer

Insurance allows for the pooling of risk among many entities, reducing the need for each individual or company to hold large reserves to cover potential losses. This mechanism spreads the financial risk over a larger group, making it more manageable and reducing the need for extensive reserves by any single entity.

Without the Insurance Mechanism, the Reserves Needed for the Economy