Charging risk-based insurance premiums is a time-honored principle of insurance management to reduce

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Charging risk-based insurance premiums is a strategy utilized by insurance managers to reduce adverse selection. This type of selection occurs when individuals with a higher risk of loss are more inclined to purchase insurance coverage than those with a lower risk. By charging a higher premium to individuals with a higher risk of loss, insurance companies can offset the higher likelihood of payouts and maintain profitability.

Charging Risk-Based Insurance Premiums Is a Time-Honored Principle of Insurance