Reference no: EM131564280

Suppose that your friend applies for private insurance and resents the number of questions asked on the application. He states that since the primary contribution of insurance companies is to pool the risk of many individuals, they should care less about the characteristics of any one applicant and more about increasing the number of the patients that they insure. Furthermore, he states, when he had insurance through his employer, he hardly had to answer any questions. Use economic reasoning to explain to your friend the insurance company's behavior.