What is the effect when the most favorably situated exposures leave a (potential) insurance pool?
A) Premiums go down.
B) Nothing
C) The cost of insurance needs to be borne by more policyholders.
D) The cost of insurance needs to be borne by fewer policyholders.

Question

Quizplus · Accepted Answer

When the most favorably situated exposures leave a (potential) insurance pool, the pool is left with a higher concentration of riskier exposures. This means that the cost of insurance needs to be borne by fewer policyholders, resulting in higher premiums for those left in the pool.

What Is the Effect When the Most Favorably Situated Exposures