The life insurance market is susceptible to two primary challenges: moral hazard and adverse selection. Moral hazard arises when individuals increase in riskier behaviors after purchasing insurance, knowing they are protected from the full consequences. For example, a insured person might disregard their health appreciably knowing that the insur… Read More

The core idea behind risk transfer markets is risk pooling. Essentially, a large group of participants contribute premiums into a common fund. This fund is then used to support those within the pool who experience a covered loss. The beauty of this system lies in the law of large numbers: while any single person's risk might be substantial, when… Read More