Pooling is a system in which a large number of people purchase insurance as a group in order to lessen the cost of coverage. Essentially, the members of the pool who are deemed low-risk compensate for the elevated cost of insuring those who are high-risk.
The easiest way to lessen the cost of insurance payouts was to refuse to insure high-risk applicants. The Affordable Care Act, however, has forbidden this practice for health insurers, compelling them to cover applicants with pre-existing conditions.
The insurance tradition has another economic model: pooling. The insured are pooled or categorized according to a given characteristic (age or location, for example). In terms of risk, the are heterogeneous, but by pooling all of their resources, they can acquire a homogeneous policy that will provide affordable coverage even to its high-risk members.
Share this Term
Stay informed with Insuranceopedia!
The world of insurance can be complicated. Subscribe to the Insuranceopedia newsletter and stay in the know! Access expert content, industry term definitions and answers to your questions from knowledgeable insurance insiders. Arm yourself with what you need to know to keep your assets and your family safe.
Latest Articles
