Since the tort system essentially acts as a deterrent and compensation mechanism for injury, payments are made only after damage has occurred. Government programs, likewise, make no demands on claimants to alter their behavior or employ risk-reduction techniques to qualify for benefits. These programs simply ascertain whether claimants qualify for damages and then pay the damages if they do. Thus, both systems employ ex post funding mechanisms. Ex ante prevention systems have the desired benefit of reducing total risk.
Insurance provides incentives and requirements to prevent losses.
The cost and availability of insurance are often linked to specific risk-prevention measures. Application requirements and continuous monitoring tend to improve compliance with established safety standards. Risk Reduction . Every purchaser of an insurance policy contributes a small share to avoid a severe loss in the event of a catastrophe. By spreading risk across a broad group, insurance reduces an individual's risk of a large loss and reduces the variance for the group as a whole by application of the law of large numbers.