Insurances
These are institutions that accumulate money in funds where claims are paid. In other words, the damage is paid by the policyholder who made the claim and all other policyholders who were not harmed at all. Insurance companies are professional risk carriers. We know that different kinds of risks can materialize. You can calculate the premium required to create a fund large enough to cover expected loss payments. Since it is clear that only a portion of policyholders will claim coverage from the fund at any given time, two key factors come into play when calculating premiums. A) Probability of loss. B) Whether each policyholder is above or below average risk.
