If the price of insurance equals the net present value (NPV)of the expected payment,it is said to be
A)actuarially fair.
B)market-based.
C)balanced.
D)equalized.
E)at equilibrium.

Question

Quizplus · Accepted Answer

When the price of insurance equals the net present value (NPV) of the expected payment, it means that the insurer is charging a premium that is actuarially fair. This indicates that the premium is based on the probability of the event occurring and the estimated cost of the outcome. Therefore, option A is the best choice. Options B, C, D, and E are not relevant to the concept of actuarial fairness.

If the Price of Insurance Equals the Net Present Value