Asked by R
Which statement correctly explains the relationship between risk and premium prices?
Prices are calculated according to a person’s risk of losing their income.
State governments use a person’s risk of filing a claim to determine prices.
Prices are generally higher for those who have a greater risk of filing a claim.
Customers self-assess their risk of filing a claim and then bid on prices.
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Correct answer: "Prices are generally higher for those who have a greater risk of filing a claim."
Explanation: Insurers set premiums to cover expected losses and expenses. If a person is more likely to file a claim (higher expected cost to the insurer), the premium will typically be higher. State regulators review and approve rates in many jurisdictions but do not directly set individual prices, and customers do not bid their own premiums.
Explanation: Insurers set premiums to cover expected losses and expenses. If a person is more likely to file a claim (higher expected cost to the insurer), the premium will typically be higher. State regulators review and approve rates in many jurisdictions but do not directly set individual prices, and customers do not bid their own premiums.
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