1. Insurers who are trying to classify insurance buyers into risk categories must weigh the benefits of accurate risk classification against

1. The social cost of risk
2. Loss of business from classifying high risks into more costly policy pools
3. The costs of collecting and evaluating information necessary for classification
4. Change in buyer behavior that might result from classification

2. Insolvency of large life companies in the 1980s and 1990s were generally the result of

1. Much higher mortality results than expected
2. Large losses on their asset portfolio
3. Ligation losses related to aggressive sales practices
4. Aggressive pricing associated with managements drive for rapid growth

3. Law of demand: as price increase, the demanded decreases. In the context of fair insurance premiums, the relevant price (or factor) that determines quantity demanded is primarily the

1. Premium loading
2. Present value of expected claims cost
3. Probability of loss
4. Level of uncertainty around loss

4. States rating systems in which insurer can changes rates without regulatory restrictions are called

1. Competitive
2. Prior approval
3. Free
4. Experience rated

5. Which of the following types of insurance will have the longest claim tail?

1. homeowners
2. automobiles physical damage (collision)
3. auto Liability
4. employee Medicare coverage

6. which of the following types of exposure are most likely to be insured on an individuals basis?

1. Exposure with high severity and low frequency
2. Exposure with low severity and low frequency
3. Exposure with high severity and high frequency
4. Exposure with low severity and high frequency

Please tell the reason