Asked by Jasma Taylor on Sep 24, 2024
Verified
In the market for insurance,low risk customers are not served because
A) They do not like buying insurance
B) They are more costly to serve
C) Products designed to be attractive to them are also attractive to high risk types.
D) All of the above
Low Risk
Situations or investments that have a minimal chance of loss or failure.
High Risk
refers to situations or activities with a high potential for loss or danger, often in the context of investments or decisions.
Insurance
A financial product that provides protection against possible future losses in exchange for a premium.
- Recognize the distinction between high risk and low risk clients and their corresponding treatment in the realm of insurance.
- Explain the role of deductibles, co-payments, and classification in insurance pricing.
Verified Answer
YP
Yesica Pimentel1 day ago
Final Answer :
C
Explanation :
Low risk customers are not served because the products that are designed to be attractive to them are also attractive to high-risk types. As a result, insurers do not find it profitable to offer insurance products to low-risk customers. Low-risk customers do generally like to buy insurance, and they are typically cheaper to serve. However, insurers cannot make a profit by offering them insurance products, as these products are also attractive to high-risk types who are more likely to file claims. Therefore, insurers prefer to focus on high-risk customers who are willing to pay higher premiums, which helps them offset the costs of claims.
Learning Objectives
- Recognize the distinction between high risk and low risk clients and their corresponding treatment in the realm of insurance.
- Explain the role of deductibles, co-payments, and classification in insurance pricing.