Administration of Group Insurance Differs from Individual Insurance Because

question 13

Multiple Choice

Administration of group insurance differs from individual insurance because:

• A)the risks involved are different.
• B)each employee in a group insurance contract receives a master contract.
• C)the employer of a large group can be responsible for the record keeping ordinarily done by the insurer.
• D)group insurance does not involve the risk of adverse selection.
• E)employers in a group insurance contract receive a certificate of insurance in recognition to the insurance provided to all or most of its employees.

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Definitions:

Framing Effects

In prospect theory, changes in people’s decision making caused by new information that alters the context, or “frame of reference,” that they use to judge whether options are viewed as gains or losses relative to the status quo.

Mental Accounting

The tendency people have to create separate “mental boxes” (or “accounts”) in which they deal with particular financial transactions in isolation rather than dealing with them as part of an overall decision-making process that would consider how to best allocate their limited budgets across all possible options by using the utility-maximizing rule.

Overpriced Warranties

Service contracts sold at a price significantly higher than the expected cost of repairs, often criticized for their value relative to the benefits provided.

Losses

The negative financial result from business activities when costs exceed revenues.