Risk cannot be pooled...


"Risk cannot be pooled if it can be determined." And "to pool risk for the entire nation."

What does these sentences mean?
I'm not sure what actually pool in here means.

Thanks a lot! ;)
  • TrentinaNE

    Senior Member
    English (American)
    In this context, to pool means to combine into a common fund. When you take out an insurance policy, you are pooling your individual risks with those of other insurance holders. The fundamental reason individuals, and insurance companies, are willing to do this is uncertainty that becomes more predictable (and hence manageable) for groups. For example, you don't know whether your house will burn down this year, but it's a pretty safe bet that for a given large group of homeowners, a certain number of homes will burn down in any given year. As part of an insurance pool, we each individually trade the certainty of relatively small annual premiums against the peace of mind that in the rare event of an actual loss, the policy will cover it.

    I believe the first sentence you quoted is saying that you cannot pool risks that are known. If it's known that my house will burn down this year, there is no risk (in the form of uncertainty) to insure. In other words, an insurer will not be willing to sell me an insurance policy except at a price that equals the known expected loss -- in which case, I'd be just as well off "self-insuring" or saving the money to pay for the loss directly.

    "Pooling risk for an entire nation" probably means including all citizens in the common risk pool, much as socialized medicine does.
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