Final answer:
It is generally false that low-severity and low-frequency risks should remain uninsured, as insurance provides financial protection and a safety net for unforeseen events, despite some choosing to self-insure such risks.
Step-by-step explanation:
The assertion that risks with low severity and low frequency should remain uninsured is generally considered false. This is because even low-severity, low-frequency risks can result in significant losses that can be detrimental to an individual or a company's financial stability. Insurance is a tool to manage risk by spreading the cost of potential losses among a group through premiums. While it's true that some may choose to self-insure or absorb the risk for low-severity occurrences, insurance offers a safety net that provides peace of mind and financial protection. Factors such as adverse selection and moral hazard also complicate the simple categorization of risks and determine insurance coverage. In the context of health insurance, even those with low risks could be subject to unforeseen medical emergencies or chronic illnesses, making insurance valuable for reducing potential out-of-pocket expenses.