Question
In: Finance
An actuarially fair insurance premium would charge more than required to cover the expected compensation for...
An actuarially fair insurance premium would charge more than required to cover the expected compensation for the expenses.
A. True
B. False
C. Uncertain
Solutions
Expert Solution
False
The acturailly fair insurance will not charge more as there are no profits for the insurance company as it is fair so it will not charge more as the insurance policy is fair.
jeff jeffy answered 2 years agoRelated Solutions
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair
insurance premium is the premium that results in a zero NPV for
both the insured and the insurer. As such, the present value of the
expected loss is the actuarially fair insurance premium. Suppose
your company wants to insure a building worth $245 million. The
probability of loss is 1.25 percent in one year, and the relevant
discount rate is 4 percent.
a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair
insurance premium is the premium that results in a zero NPV for
both the insured and the insurer. As such, the present value of the
expected loss is the actuarially fair insurance premium. Suppose
your company wants to insure a building worth $460 million. The
probability of loss is 1.30 percent in one year, and the relevant
discount rate is 2.1 percent.
a.
What is the actuarially fair insurance premium? (Do not
round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair
insurance premium is the premium that results in a zero NPV for
both the insured and the insurer. As such, the present value of the
expected loss is the actuarially fair insurance premium. Suppose
your company wants to insure a building worth $295 million. The
probability of loss is 1.28 percent in one year, and the relevant
discount rate is 3.2 percent.
a.
What is the actuarially fair insurance premium? (Enter
your...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair
insurance premium is the premium that results in a zero NPV for
both the insured and the insurer. As such, the present value of the
expected loss is the actuarially fair insurance premium. Suppose
your company wants to insure a building worth $280 million. The
probability of loss is 1.44 percent in one year, and the relevant
discount rate is 3.6 percent.
a.
What is the actuarially fair insurance premium? (Enter
your...
Describe the necessary conditions necessary required for firms to offer actuarially fair insurance.
Describe the necessary conditions necessary required for firms
to offer actuarially fair insurance.
Describe the necessary conditions necessary required for firms to offer actuarially fair insurance.
Describe the necessary conditions necessary required for firms
to offer actuarially fair insurance.
If firms offer actuarially fair insurance, how much insurance will a consumer demand given loss ??...
If firms offer actuarially fair insurance, how much insurance
will a consumer demand given loss ?? with probability ??. At the
optimum, what is the marginal rate of substitution between income
in the bad state and income in the good state with respect to
probability ???
If firms offer actuarially fair insurance, how much insurance will a consumer demand given loss L...
If firms offer actuarially fair insurance, how much insurance
will a consumer demand given loss L with probability p. At the
optimum, what is the marginal rate of substitution between income
in the bad state and income in the good state with respect to
probability p?
A risk neutral agent is indifferent between two insurance products if both are actuarially fair.
A risk neutral agent is indifferent between two insurance
products if both are actuarially fair.
) Market imperfections can raise the cost of insurance above the actuarially fair price. Explain three...
) Market imperfections can raise the cost of insurance above
the actuarially fair price. Explain three frictions that may arise
between the firm and its insurer.
(b) Suppose you are the manager of an insurance company.
Describe three ways in which you can reduce the above-mentioned
frictions.
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