Actuarially fair insurance is equivalent to:

Question

Quizplus · Accepted Answer

Actuarially fair insurance means that the premium paid by the insured person is equal to the expected value of the claim. Therefore, it is a fair bet for both the insurer and the insured person. There is no skewed risk-reward trade-off as both parties are paying/receiving an amount equal to their expected value. Diversification and raising the expected utility are not necessarily equivalent to actuarially fair insurance.

Actuarially Fair Insurance Is Equivalent To