What is the effect of a larger risk pool on insurance coverage?

A larger risk pool has a significant impact on insurance coverage by increasing financial stability for the insurer. When more individuals are part of the risk pool, the insurer can spread the risks across a larger group. This diversification allows the insurer to manage its liabilities more effectively, resulting in more predictable loss patterns. With a greater number of insured individuals, the premiums collected can offset the claims made, mitigating the financial impact of larger, unexpected claims.

Additionally, the larger the risk pool, the more accurate the predictions for future claims can be, based on statistical data. This reduces uncertainty for the insurer and enables more stable premium pricing, which can lead to greater confidence in the long-term sustainability of the insurance services provided.

The other options presented do not align with the fundamental principles of risk pooling. For instance, increasing the size of the risk pool does not lead to significantly raised premium rates; it typically allows rates to be more competitive and stable. Similarly, a larger risk pool does not limit the number of insured individuals, nor does it complicate risk assessment—rather, it simplifies it through enhanced data availability.