Final answer:
The statement that insurance delivers only future payment in case of a loss is false, as insurance may offer other services aside from financial remuneration. Insurance is a complex system of sharing risk and providing various forms of support while dealing with imperfect information about future events and individual risks.
Step-by-step explanation:
The statement that insurance delivers only future payment in case of a loss is false. Insurance is indeed a method of protecting a person from financial loss, where policyholders make regular payments to an insurance entity. However, insurance can also include other benefits such as legal representation or carrying out immediate repairs, not just future financial compensation.
Insurance entities collect premiums and in return, provide remuneration to policyholders who suffer significant financial damage from an event covered by the policy, but this is not the sole function of insurance. Additional services and support may also be part of the insurance contract. Furthermore, the concept of moral hazard highlights that individuals with insurance might behave differently, knowing they are protected against certain risks.
How Insurance Works
Insurance involves sharing risks among a group of people. The premiums paid must average out to cover the payouts for those who incur losses. Due to imperfect information, estimating risks is challenging, leading to situations where adverse outcomes are influenced by a mix of individual characteristics, choices, and luck.