Final answer:
A group of individuals who mutually share each others' losses is known as a reciprocal exchange. It's part of a risk-sharing strategy within the realm of insurance that addresses the pooling of risks and the actuarial fairness of premium payments compared to received benefits.
Step-by-step explanation:
A group of individuals who agree to share each others' losses is known as a D) reciprocal exchange. This concept is relevant to the broader topic of insurance, which is a method of protecting individuals from financial loss by pooling risks. Everyone in the group pays premiums to cover potential losses, and those who actually experience a covered event receive compensation. The payments collected from the group must be sufficient to cover claims, the insurance company's administrative costs, and allow for a profit. This is aligned with the fundamental law of insurance. A risk group is comprised of people who share similar risks of experiencing an adverse event based on various factors such as location, personal habits, or genetics. An actuarially fair insurance policy is one where the premiums paid by a person match the average benefits received for the individual's risk group. Lastly, moral hazard occurs when individuals take fewer precautions against a risk because they have insurance coverage.