The fundamental idea(s) that make(s) the insurance industry possible is/are: (ch

Question

The fundamental idea(s) that make(s) the insurance industry possible is/are: (check all that apply)

It is possible to transfer risk from one party to another in a mutually beneficial arrangement.

Protection from loss will not encourage insured parties to take unnecessary risks

Risk is something difficult to assess, but some agents become experts on it.

Insurance companies, unlike people, are completely risk-neutral.

Diversification can lower the risk of a total loss.

Some wealthy individuals are risk-loving.

Explanation / Answer

Option A and E are correct.

After getting an insurance done, the insured person/group has transferred their risk to the insurer. Now in case of any mishap the insurer would bear the cost.

Diversifying the risk across different insured group/individual, the risk of loss is minimised because it is assumed that not all could be at loss together.

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