Insurance is defined as pooling of risk because many people

Insurance is defined as pooling of risk because many people with common risk insure with the same company. The basic idea of insurance is to share the financial risk of uncertain events among a large group of people. Insurance companies collect premiums from a large number of policyholders, who face similar risks, and pool the money to create a fund that can be used to pay out claims to those who suffer a loss. In this way, the financial burden of any individual's loss is spread across the entire group, reducing the impact of the loss on any one person. The concept of pooling risk is particularly important because it helps to reduce the financial impact of unexpected events. For example, if an individual has to pay for a large, unexpected medical expense out of pocket, it can be very difficult for them to absorb the cost. However, if the individual is insured, the cost of the medical expense can be shared among a large group of policyholders, making it more manageable for everyone. In summary, insurance is defined as pooling of risk because many people with common risk insure with the same company, sharing the financial burden of uncertain events among a large group of people.