Insurance mitigates uncertainty by transferring risk from the policyholder to the insurance provider. O True O False Which are the reasons why buying insurance may not always be advisable? (multiple choice) Insurance is exposed to adverse selection and moral hazard 1. 2. Insurance premium is set to cover operating costs and earn profits for the insurance provider 3. Insurance providers are prone to fail due to reckless investments 4.0 Insurance premium is wasted if the insured event does not materialize 5. One may prefer to accept the variability in outcomes resulting from an event Derivatives transfer risks between contracting parties so that each party would take risks that they prefer. O True O False