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What an insurance company does is to take the risk of loss and by spreading the risk they limit the exposure and therefore reduce the cost. By taking the risk of loss from lots of people they use the law of large numbers and reduce the cost to individuals. By insuring lots of people and taking premiums from many they are able to pay any claims to a few. This is how insurance companies are able to spread the risk. This spreading of the risk works basically the same for all types of insurance and all type of loss. In life insurance for example the companies use actuarial tables to calculate the risk of loss (chance of dying) and therefore come up with the premiums.

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12y ago
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15y ago

The function of insurance companies is to pay out if you are in an accident or require reimbursement after such as an accident caused by yourself or another person.

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15y ago

what are the functions of insurance

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Q: What are the functions of insurance companies?
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