Question

In: Economics

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.

Solutions

Expert Solution


Related Solutions

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?
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
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...
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.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT