Insurance is an economic institution in which individuals or organizations pool risk by paying premiums to an insurer, who agrees to compensate them for specified future losses, spreading the financial cost of unpredictable events such as death, illness, property damage or liability across a larger group. Institutional forms of risk pooling have ancient roots, including merchant guilds and maritime associations that historically compensated members for shipping losses, and grew into the modern life, health, property and casualty insurance industries regulated by national authorities today. Insurance functions as a stabilizing social institution by allowing individuals and businesses to manage financial risk that would otherwise be catastrophic if borne alone.
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