Insurance choice and risk:

We have seen that people, in general, are risk averse and would be willing to buy insurance. Viewed from such a perspective, insurance is an exchange in which you make a payment in order to get rid of a gamble - that is, to avoid or reduce a risk. However, if everyone is risk averse, a seller of insurance seems a part of the group. You cannot then explain the existence of an insurance market without saying that insurance company is risk lover. To come to a definite conclusion, if will be necessary for us to examine the operation of insurance market.

保险市场采用的降低风险机制取决于大量法律，这几乎可以确定地评估不确定的结果。因此，采用了风险汇总风险，扩散和风险转移工具。风险汇集和风险转移机制导致社会的帕累托改善。保险市场表现出无保险或少于全部保险的持续存在的事实，试图解释。尽管信贷限制可能是人们不购买保险的主要因素，但存在结构性问题，例如不利的道德危害选择，这导致不足以作为可行的选择。

Insurers may have less information about potential risks than the insurance purchasers resulting in adverse selection. Insurers unable to monitor for the behaviour of insured leads to moral hazard problems. Such problems give rise to self-selection in insurance markets. When the resulting equilibria exist, which are seen by considering pooling and separating equilibrium, often found to be Pareto inefficient.