Question

In: Economics

Fair insurance A. has very high insurance premiums. B. has a positive expected value for the...

Fair insurance

A. has very high insurance premiums.

B. has a positive expected value for the insurance company.

C. is available only to those who fully insure.

D. has an expected value for the policy holder of zero.

Solutions

Expert Solution

Insurance is fair if the premium paid is equal to the expected value of the compensation received. That is it has a positive expected value for the insurance.

Option B is correct

Rahul Sunny answered 2 years ago
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