Which of the Following Practices Allows Insurance Firms to Reduce

question 68

Multiple Choice

Which of the following practices allows insurance firms to reduce the costs imposed by the high-risk customers?

• A)A homeowners' insurance covers only the market value of structures and contents
• B)A higher premium is charged under a group insurance than a single party insurance
• C)A vehicle insurance charges different rates of premium each year
• D)A fixed claim is honored by a fire insurance contract for all the houses in an apartment

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Definitions:

Efficient Markets

Markets in which all available information is fully reflected in asset prices, making it impossible to consistently achieve higher returns than the overall market.

Opportunity Cost

The cost of foregone alternatives, representing the benefits that could have been received by choosing the next best alternative.

Retail Value

The price at which a product is sold to the end consumer, typically including markups from wholesale or manufacturing costs.

Barbie Doll

A fashion doll manufactured by the American toy-company Mattel, Inc. and launched in March 1959.