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Why is it important for insurance companies to have a large risk pool of people paying premiums?
a.If a large pool of people pay premiums, insurance company employees will get more bonuses included in their next paycheck
b.The premium payments of all the insured clients will cover the costs for the emergencies of the few who need it
c.The more people that pay premiums, the more careful each insured client becomes with their lifestyle choices
d.A large pool of people paying premiums allows insurance companies to have a larger social media following
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GPT-5 mini
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Answer: b.
Explanation: Insurance pools risk — many people pay relatively small premiums so the insurer can pay the relatively few claims that occur. A large pool makes losses more predictable (law of large numbers) and spreads cost, keeping premiums affordable. The other options are incorrect or irrelevant (employee bonuses, social media following) or confuse cause/effect (pool size doesn't make people more careful).
Explanation: Insurance pools risk — many people pay relatively small premiums so the insurer can pay the relatively few claims that occur. A large pool makes losses more predictable (law of large numbers) and spreads cost, keeping premiums affordable. The other options are incorrect or irrelevant (employee bonuses, social media following) or confuse cause/effect (pool size doesn't make people more careful).
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