Insurance. The idea of insurance is that we all face risks that are unlikely butcarry
Chapter 0, Problem 11.5(choose chapter or problem)
Insurance. The idea of insurance is that we all face risks that are unlikely butcarry high cost. Think of a fire destroying your home. Insurance spreads the risk:we all pay a small amount, and the insurance policy pays a large amount to thosefew of us whose homes burn down. An insurance company looks at the records formillions of homeowners and sees that the mean loss from fire in a year is = $250per person. (Most of us have no loss, but a few lose their homes. The $250 is theaverage loss.) The company plans to sell fire insurance for $250 plus enough tocover its costs and profit. Explain clearly why it would be unwise to sell only12 policies. Then explain why selling thousands of such policies is a safe business.
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