Tom and Sarah are both 24 years old and looking for car insurance. While comparing numbers, they notice the car insurance premiums charged for young male drivers are higher than the premiums for young female drivers. This is due to the rule of indemnity.

Question

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The rule of indemnity says that an insured person cannot collect more than the actual loss from an insurable risk. Premiums are charged for anticipated costs to the insurance company. Providing insurance protection for young male drivers is more expensive than the costs of covering female drivers.

Tom and Sarah Are Both 24 Years Old and Looking