A fairly-priced insurance policy is one in which:
A)the insurance premium is equal to the expected value of the promised insurance payment.
B)the insurance premium is equal to the expected value of the promised insurance payment plus a small profit for the insurance company.
C)the insurance premium is equal to the variance of the expected value of the promised insurance payment.
D)the insurance premium is equal to the variance of the expected value of the promised insurance payment plus a small profit for the insurance company.

Question

Quizplus · Accepted Answer

A fairly-priced insurance policy is one where the premium equals the expected value of the promised payment, covering the expected loss without additional profit.

A Fairly-Priced Insurance Policy Is One in Which