Which of these best describes risk pooling?
Insurance companies must avoid situations whereby customers are incentivized to intentionally cause an incident (e.g. burning their house down).
If individual events are independent, risk can be decreased by averaging across all of the events.
If individual events are not independent, risk can be decreased by averaging across all of the events.
Sick people are more likely to sign up for health insurance, and healthy people will not purchase the policy because this will make the premium more expensive.