Actual insurance premiums charged by insurance companies may exceed the actuarially fair rates because:
A. the insurance companies have monopoly rights issued by state regulators.
B. the insurance companies are risk averse.
C. there are administrative costs and other expenses that must be covered by the premia.
D. insurance companies tend to over-state the risks they face.
Answer:C
Actual insurance premiums charged by insurance companies may exceed the actuarially fair rates because:
A. the insurance companies have monopoly rights issued by state regulators. B. the insurance companies are risk averse. C. there are administrative costs and other expenses that must be covered by the premia. D. insurance companies tend to over-state the risks they face.