What does the ubiquity principle in insurance focus on?

The ubiquity principle in insurance pertains to the idea that insurance can provide coverage for a wide array of risks that policyholders face, thereby enhancing the overall stability and effectiveness of the insurance pool. This principle emphasizes the importance of achieving a broad base of policyholder participation. By spreading the risk across a larger group of individuals, the insurance company can maintain balanced premiums that reflect the collective risk of the entire pool.

When there is widespread policyholder coverage, it helps to prevent extreme losses that could arise from a few high-risk claims overwhelming the system. Ensuring diverse participation not only stabilizes the premium rates for the policyholders but also reinforces the insurance model where the costs of risk are shared among many rather than being heavily concentrated on a few. This linkage to balancing premiums through widespread policyholder coverage is crucial for maintaining the sustainability of an insurance company, which the ubiquity principle effectively underscores.