ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A health insurance risk pool is a group of individuals whose medical costs are combined to calculate premiums. Pooling risks. together allows the higher costs of the less healthy to be offset by the relatively lower costs of the healthy, either in a plan overall or within a premium rating category.

Detailed explanation-2: -Insurance companies try to mitigate moral hazard by structuring policies that incentivize behavior that does not lead to claims and penalizing actions that do. It can also take the form of more practical strategies like deductibles and premium reduction for fewer claims.

Detailed explanation-3: -Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of insurance company? An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.

Detailed explanation-4: -Insurance is a legal agreement between two parties – the insurer and the insured, also known as insurance coverage or insurance policy. The insurer provides financial coverage for the losses of the insured that s/he may bear under certain circumstances.