"Subsidization" in an Insurance Pool Means

question 24

Multiple Choice

"Subsidization" in an insurance pool means:

• A) the bad risks pay more for insurance than good risks
• B) the premiums collected by the insurers don't adequately cover the losses experienced by the pool
• C) those who experience losses have their premiums raised
• D) exposures that should be charged higher insurance rates are averaged in a pool so that the good as well as bad exposures pay the same rate

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Definitions:

Conciliation

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Distinctiveness-Based Illusory Correlation

A cognitive bias where individuals overestimate the association between unique or distinctive events and specific outcomes.

Minority

A smaller part of a group differing from the majority in ethnic, religious, political, or other characteristics.

Expensive Jewellery

High-value adornments made from precious materials and stones, often considered luxury items.