Final answer:
An insurance policy must comprehensively detail the entire agreement between the insurer and the insured to align with the entire contract policy provision. It must cover the insured's claims, the insurer’s operating costs, and enable profit-making. Government mandates can influence insurance pricing and risk selection.
Step-by-step explanation:
To meet the requirement of the entire contract policy provision, an insurance policy must contain a complete agreement between the insurer and the insured, including all clauses, riders, endorsements, and papers attached thereto, and incorporated therein. This ensures transparency and agreement on the terms of coverage, including the insurer's promise to cover specific losses in exchange for the premium paid by the policyholder.
The fundamental law of insurance dictates that the average person's payments into insurance over time must adequately cover their own claims, the costs of running the insurance company, and allow for the company's profits. Factors that can influence this include investment income on reserves, administrative costs, and the presence of groups with different risk profiles.
Moreover, government interventions like requiring mandatory purchase of insurance can affect pricing and market dynamics by reducing the issues of adverse selection, thereby allowing the insurer to set prices based on an average risk for the entire market. However, these interventions do not compel insurers to cover high risks at low costs.