Insurance companies:
A)profit from the difference between the premiums paid and the expected value of clients' payouts.
B)must charge more than the expected value of payout for the service of managing risk.
C)must charge more than the expected value of payout,otherwise they would go out of business.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

Insurance companies need to charge more than the expected value of payout to cover their expenses and make a profit, which is achieved by the difference between the premiums paid and the expected payouts. If they charge less, they will lose money and may go out of business. Therefore, all of the statements are true.

Insurance Companies