Many insurance companies sell auto insurance that includes a "deductible" of $250 or $500. If you have an accident, your insurance covers all of your costs minus the amount of the deductible. The amount that they pay on a typical claim is far more than the amount of the deductible. True or False: If the deductible were eliminated, the percent increase in claim payments would be small.
Therefore, because insurance companies must earn zero profits, the percent increase in premiums would be small as well.