In reality, market imperfections exist that can raise the cost of insurance above the actuarially fair price and offset some of these benefits. These insurance market imperfections include all of the following EXCEPT:

Question

Quizplus · Accepted Answer

Taxation of insurance payments is not considered an insurance market imperfection that can raise the cost of insurance above the actuarially fair price. The other options, agency costs, adverse selection, and administrative and overhead costs, are all market imperfections that can affect the cost of insurance.

In Reality, Market Imperfections Exist That Can Raise the Cost