Riskloving

Opposite of risk aversion. See Expected Utility Theory. Risk-neutral

Being neither risk-averse nor risk-loving. See Expected Utility Theory.

304 Risk Pooling Risk Pooling

Insurance pools risks. Since the costs of health care can be extremely high, uninsured individuals face possible large losses. By agreeing to contribute a small premium to a common pool held by an insurer for use to compensate whoever actually suffers the loss, individuals may be able to reduce the net costs of risk bearing in a way that increases their welfare. Premiums will normally include elements beyond the expected cost of insured events and their probabilities of occurring in order to cover the operating costs of the insurer and a return on capital (so-called loading). See Adverse Selection.

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