Which of the Following Is Not an Advantage to an Insurance

question 109

Multiple Choice

Which of the following is not an advantage to an insurance company insuring a large group of people for health insurance?

• A)The characteristics of a large group are likely to reflect those of the entire population.
• B)It is easier to accurately predict the number of claims for a group than for an individual.
• C)When all group members pay the premium, the problem of moral hazard is reduced.
• D)When all group members pay the premium, the problem of adverse selection is reduced.

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Definitions:

Common Size Income Statement

An income statement in which each line item is expressed as a percentage of sales revenue, facilitating comparison across companies or periods.

Percent of Assets

A measure or indicator expressed as a percentage of a company's total assets.

Interest Coverage Ratio

A financial metric used to determine how easily a company can pay interest on outstanding debt with its current earnings before interest and taxes.

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets.