ABSTRACT
This chapter examines insurance companies, and explains risk pooling and two special kinds of risk created by insurance, adverse selection and moral hazard, professional employment in the insurance industry. It discusses various aspects of the life, health, property and casualty insurance businesses, how insurance companies manage adverse selection and moral hazard and insurance industry regulation. The essential principle underlying insurance is that through the pooling of risks, a loss that would be unbearable if borne by one person becomes bearable if shared with enough other people. Types of life insurance coverage include term life insurance, permanent life insurance, annuities, disability insurance and long-term care insurance. The National Association of Insurance Commissioners (NAIC) develops model laws and regulations that are often used by state legislatures when revising or writing new legislation. The state of New York comprises a large life insurance market and is the headquarters for many insurance companies, its laws and regulations have a widespread impact on the industry.
