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A pooling arrangement, i.e., insurance, reduces risk for all the participants. Since almost everyone prefers lower risk, we should have full insurance for all risks.

A pooling arrangement, i.e., insurance, reduces risk for all the participants. Since almost everyone prefers lower risk, we should have full insurance for all risks.

Give and explain three reasons why the previous statement is not likely to be true, i.e., why we would not likely observe full insurance for all risks.

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