Question

In: Finance

Insurance companies charge young male drivers much higher rates until they get to be 25. Discuss...

Insurance companies charge young male drivers much higher rates until they get to be 25. Discuss your understanding why that should or should not be the case!

Solutions

Expert Solution

In my view the companies are right in their approach. Young male drivers are aggressive and at times irresponsible. They are more prone to accidents than matured drivers. Also they are not experienced enough to handle the threats faced by drivers as compared to older drivers. Hence they need to be charged higehr rates to cover the higher risk of insurance companies.


Related Solutions

Insurance companies charge young male drivers much higher rates until they get to be 25. Discuss...
Insurance companies charge young male drivers much higher rates until they get to be 25. Discuss you understanding why that should or should not be the case!
Insurance companies charge higher premiums for people who smoke. Should they be allowed to charge higher...
Insurance companies charge higher premiums for people who smoke. Should they be allowed to charge higher premiums based on people's weight (i.e., obese, overweight). Do you think this would be effective in getting people to reduce their BMI or change their diet.
Do you consider it to be unethical for insurance companies to charge high-risk people a higher...
Do you consider it to be unethical for insurance companies to charge high-risk people a higher premium than low-risk people?
Life insurance companies usually charge a higher premium to smokers than non-smokers. Given this, what is...
Life insurance companies usually charge a higher premium to smokers than non-smokers. Given this, what is the potential for adverse selection and moral hazard in the process of new applicants? How can the company reduce or eliminate those problems? Most credit cards charge a relatively high rate of interest, yet low-risk borrowers carry them. The adverse selection concept says that low-risk borrowers should be discouraged from credit cards. Why is this not the case? Your friend maintains a very high...
Automobile insurance companies require drivers they insure have a valid drivers’ license and will not pay...
Automobile insurance companies require drivers they insure have a valid drivers’ license and will not pay 100% of damage claims. Explain why.
8. An insurance agent theorizes that the fraction of uninsured drivers is higher in states with...
8. An insurance agent theorizes that the fraction of uninsured drivers is higher in states with no-fault auto insurance (e.g. Michigan) than in states with tort auto insurance (e.g. Wisconsin). To test this theory she samples 150 drivers from Michigan and 125 drivers from Wisconsin and finds that 42 and 23 are uninsured in the two samples, respectively. Let Michigan drivers be population 1 and Wisconsin drivers be population 2. a. Set up the null and alternative hypotheses to test...
The premiums insurance companies charge to members of a group insurance plan are tied to the...
The premiums insurance companies charge to members of a group insurance plan are tied to the historical losses experienced by the members of the plan. Select one: a. true b. false
A large car insurance company is conducting a study of accidents for male and female drivers.
A large car insurance company is conducting a study of accidents for male and female drivers. They want to know if on average male drivers (who tend to be thought of as more aggressive drivers) have more accidents than female drivers. Data on the number of accidents in the past 5 years is collected for randomly selected drivers who are insured by this company. An analysis of the results produced the following summary statistics.Group Statistics                                        NMeanStd DeviationStd Error MeanMale322.191.710.3026Female311.231.380.2482Using α=0.01, do...
Why do insurance companies charge different rates based on age, sex, marital status, where people live,
Why do insurance companies charge different rates based on age, sex, marital status, where people live, how much they drive, whether they smoke, driving record, etc?
1) Why do insurance companies charge different rates based on age, sex, marital status, where people...
1) Why do insurance companies charge different rates based on age, sex, marital status, where people live, how much they drive, whether they smoke, driving record, etc? 2) Asymmetric information and how to deal with it? 3) Why is price discrimination more prevalent for services than goods? Need help with these 3 homework questions.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT