A tricky business

INSURANCE rests on the idea of imperfect knowledge. Since its creation in the 17th century, insurers have sought to amass lots of policies in each class of risk they cover. They do so not only to make money, but also to be safer. This is the law of large numbers. Insurers don’t know exactly where risks lie. By insuring a barrelful of policies, it matters less if one of them is bad.