All of the following are reasons to explain why the insurance transaction is so carefully regulated...

All of the following are reasons to explain why the insurance transaction is so carefully regulated except:

Select one:

a. Insolvent insurers can create serious social-economic problems.

b. Insurance buyers and sellers have unequal knowledge.

c. Insurance prices must be set before costs are known.

d. Insurance company failures were a significant contributing factor to the Great Depression of the 1930s

Solutions

Expert Solution

All of these can be true except (C), which says insurance prices must be set before costs are known. This statement is incorrect because the insurance prices are set only after complete diligence of the risk involved and the maximum cost that the insurance company can incur, and the premium is then calculated after taking into account all these things. So the answer is (C)

jeff jeffy answered 1 year ago

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