Which of the following statements is correct about the fair rate of return for insurance companies?
A) The fair rate of return is measured using the expense ratio.
B) The fair rate of return is governed by law.
C) The fair rate of return reduces the insurance premiums charged by insurance companies.
D) The fair rate of return compensates the insurance companies for the risk that they take.

Question

Quizplus · Accepted Answer

The fair rate of return compensates insurance companies for the risk that they take. It is not measured using the expense ratio or governed by law, nor does it directly reduce insurance premiums.

Which of the Following Statements Is Correct About the Fair