All of the following statements about regulatory objectives of insurance rate making are true EXCEPT
A)One purpose of rate adequacy is to maintain the solvency of insurers.
B)Rates unfairly discriminate if loss exposures that are similar with respect to losses and expenses are charged substantially different rates.
C)Insurers know in advance if the coverages marketed will be profitable,so rate regulation is not needed.
D)Rates are excessive if policyholders are paying substantially more than the actual value of their protection.

Question

Quizplus · Accepted Answer

The statement "Insurers know in advance if the coverages marketed will be profitable, so rate regulation is not needed" is false. Insurance companies cannot predict all future loss scenarios and market conditions with certainty, which is why rate regulation is necessary to ensure that rates charged are fair and reasonable.

All of the Following Statements About Regulatory Objectives of Insurance