What is the primary function of 'insurance pools'?

The primary function of insurance pools is to combine premiums to cover very high-risk individuals. By pooling resources together, insurers can more effectively manage and mitigate the risks associated with underwriting policies for individuals who would otherwise be deemed too risky to insure at standard rates.

Insurance pools enable insurers to share the financial burden of potential claims, allowing them to provide coverage for individuals or entities that pose a higher risk. This collective approach not only supports those who may struggle to find coverage in the broader insurance market but also helps stabilize premiums for all members of the pool by spreading the risk across multiple participants.

In contrast, the other responses refer to different aspects of insurance mechanisms, but they do not capture the core function of insurance pools. For instance, while distributing risk among multiple insurance companies is a common practice, it doesn't specifically define the role of a pooling arrangement. Similarly, increasing the likelihood of payouts and creating a fund for excluded claims pertain to more specific operations and objectives within the broader insurance framework rather than the fundamental concept of insurance pools.