Which of the following statements about risk-bearing financial institutions is not correct? A) They are a good example of creating self-insurance by the customers of these institutions. B) They allow its customers to transfer their financial risks to the institution for a fee. C) They capitalize on their size to mitigate risks. D) They finance the cost of any losses by the fees they get from their customers.

Question

Quizplus · Accepted Answer

Risk-bearing financial institutions do not create self-insurance for their customers. Instead, they allow customers to transfer risk to the institution, which then manages and mitigates these risks through various strategies, including leveraging their size and pooling risks. Self-insurance typically refers to an entity setting aside funds to cover potential losses, rather than transferring risk to another party.

Which of the Following Statements About Risk-Bearing Financial Institutions Is