Which of the following statements about the insurer death spiral is not correct? A) The insurance pool is shrinking to those who really need insurance. B) The remaining policyholders are not susceptible to the peril being insured. C) The insurance pool is shrinking to those who are facing high risk. D) The insurance premium that needs to be paid is very high.

Question

Quizplus · Accepted Answer

The insurer death spiral involves the insurance pool shrinking to those who are most in need of insurance (facing high risk) and consequently, the premiums become very high. Statement B is incorrect because it suggests the remaining policyholders are not susceptible to the peril being insured, which contradicts the concept of the death spiral where the pool increasingly consists of those at high risk.

Which of the Following Statements About the Insurer Death Spiral