(a) To explain: The meaning of pooling of losses. Introduction: Insurance system supports the healthcare services which comprises of various insurer and insured. The system is based on the collection of amount and payments of the partial or total amount to the insured that may requires it at different time period. Pooling of losses refers to the application of law of large numbers. Pooling means to club all the individuals who are exposed to similar kind of risk by which risk can be spread to every individual and that individual will bear the average loss rather than the actual loss. It is based on two features such as the large group shared the losses and estimation of losses with accuracy. (b) To explain: The meaning of payment only for the concern losses. Introduction: Insurance system supports the healthcare services which comprises of various insurer and insured. The system is based on the collection of amount and payments of the partial or total amount to the insured that may requires it at different time period. Insurer may claim for only random losses. Random losses are the losses that are unforeseen and uncertain or which cannot predicted with accuracy. Insurance system covers the losses that are random. (c) To explain: The meaning of risk transfer. Introduction: Insurance system supports the healthcare services which comprises of various insurer and insured. The system is based on the collection of amount and payments of the partial or total amount to the insured that may requires it at different time period. Risk transfer refers to the process by which risk from insured can be transferred to the person who is stronger financially i.e. generally termed as the insurer. (d) To explain: The meaning of indemnification. Introduction: Insurance system supports the healthcare services which comprises of various insurer and insured. The system is based on the collection of amount and payments of the partial or total amount to the insured that may requires it at different time period. Indemnification means the reimbursement of the losses that incurred to the insured. In other words, insurer makes the payment of the full or partial amount in order to restore the financial position of the insurer as it was before the occurrence of losses.

Healthcare Finance: An Introduction to Accounting and Financial Management

6th Edition

ISBN: 9781567937411

Author: Louis C. Gapenski, Kristin L. Reiter

Publisher: Health Administration Press

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Solution Summary: The author explains the meaning of pooling of losses, risk transfer, and indemnification.

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