The essence of the insurance principle is the sharing of losses by those exposed to a common hazard. This is made possible by contributions to a common fund by those exposed to loss from the common hazard. If the plan is to be scientific and equitable, however, each participant must pay into the fund a sum of money reasonably commensurate with the risk that the insured places on the fund. To accomplish this objective an insurance company prepares a schedule of premiums that represents its judgment as to the risk inherent in each category of applicants acceptable to the company. The function of the selection process is to determine whether an applicant’s degree of risk for insurance is commensurate with the premium established for people in the same classification being considered. If within each broad risk category, various graduations of risk have been established, as would be true of a company that offers either preferred risk or substandard insurance, the evaluation of an application for insurance involves not only selection but also classification.