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

Question

​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

Quizplus · Accepted Answer

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.

​In the Market for Insurance,low Risk Customers Are Not Served

In the Market for Insurance,low Risk Customers Are Not Served