Insurance companies have to generate enough revenue to cover their costs and make a normal profit
Question:
Insurance companies have to generate enough revenue to cover their costs and make a normal profit — otherwise, they will go out of business. This implies that the premiums charged for insurance policies must be greater than the expected payouts to the policyholders. Why would a person ever buy insurance, knowing that the price is greater than the expected payout?
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Riskaverse people are willing to pay ...View the full answer
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Related Book For 
Managerial Economics and Organizational Architecture
ISBN: 978-0073375823
5th edition
Authors: James Brickley, Jerold Zimmerman, Clifford W. Smith Jr
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