Which of the following best describes the nature of health insurance?

The concept of pooled risk is fundamental to understanding how health insurance operates. Insurance itself is designed to protect individuals against financial loss due to unforeseen events, such as illness or accidents. In health insurance, the risk of needing medical care is shared among a large group of people, which is referred to as pooling.

This pooling of risk means that each member contributes a premium, and in return, they gain coverage for potential medical expenses. Because not everyone will require care at the same time, the collective funding allows insurers to pay for the healthcare needs of those who do. By spreading the risk across many individuals, it becomes more manageable and affordable while providing a safety net for those who need it.

In contrast, individual risk refers to the unique likelihood of an individual encountering a specific event, such as falling ill or needing medical care. This approach would lead to higher costs and less accessibility for those who are considered higher risk.

Investment solutions and fixed assets pertain to financial products and physical property, respectively, and do not relate to the nature of health insurance, which is primarily about risk management and protection rather than investment or asset accumulation. Thus, pooled risk is the best description of the nature of health insurance because it encapsulates the collective approach to managing uncertainties related to