Final answer:
Insurance professionals are expected to be knowledgeable and trustworthy, effectively manage risks, and ensure fair premiums. They work with large client pools for better rates, and the average person's insurance payments cover claims, costs, and profits. Individuals are part of different risk groups, affecting their insurance terms.
Step-by-step explanation:
Public confidence in insurance is based on the belief that the professionals with whom they deal are knowledgeable, trustworthy, and can effectively manage risk. People purchasing insurance or life insurance often have more information about their own risks, such as their family's health history or their personal driving habits, than insurance companies can feasibly obtain. Despite this information asymmetry, insurers use various strategies to offer fair premiums and maintain profitability.
Insurance companies work with large pools of clients, allowing them to negotiate better rates with service providers. This benefits consumers by making insurance more affordable and also saves money for insurance firms when paying out claims. Meanwhile, a fundamental law of insurance stipulates that the average person's payments into insurance should cover their own claims, the company's operational costs, and provide a margin for profit. Furthermore, individuals may fall into different risk groups depending on various factors like genetics and personal habits, affecting their insurance premiums and coverage.