Which of the following is NOT a key principle of insurance?

In the context of insurance, key principles are fundamental concepts that guide how insurance operates and provides coverage. The principle of plausibility does not fit within the recognized core principles of insurance, which typically include risk pooling, indemnity, and moral hazard.

Risk pooling is the mechanism by which a large group of individuals or entities contribute to a common fund, spreading the financial risk of loss among many participants. This principle helps ensure that when losses occur, the burden is shared, making it more manageable for individuals.

Indemnity is another crucial principle, which stipulates that insurance is intended to restore the insured to the financial position they were in prior to a loss. This means that insurance should compensate for losses but not allow the insured to profit from the insurance coverage.

Moral hazard refers to the scenario where the behavior of the insured party may change as a result of having insurance coverage. For example, a person with comprehensive car insurance may be less cautious about driving because they know their insurance will cover damages.

Since plausibility does not relate to these essential principles and does not have a defined role in the insurance process, it is identified as not being a key principle of insurance.