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Explain Why an Insurance Company Is Willing to Sell Life

question 114

Essay

Explain why an insurance company is willing to sell life insurance to individuals,but will be more reluctant to issue policies insuring against earthquake damage to residents living along fault lines.Why don't insurance companies simply charge the residents a premium that reflects the actuarial probability of damage from earthquakes?


Definitions:

Wavelength

The distance between successive crests of a wave, often used to describe the spectrum of electromagnetic radiation.

Visible Light

The portion of the electromagnetic spectrum that is visible to the human eye, ranging approximately from 390 to 700 nanometers wavelength.

Energy

The capacity to perform work or to produce changes within a system, existing in kinetic, potential, thermal, electrical, chemical, nuclear, or other various forms.

Violet

A color at the end of the visible spectrum of light, next to blue, and opposite of yellow.

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