Author Question: Monopoly Insurance is the only company marketing a certain line of insurance in a state. After ... (Read 32 times)

tth · **on:** Jul 11, 2018

Monopoly Insurance is the only company marketing a certain line of insurance in a state.

After complaints from several consumers, the State Insurance Department investigated Monopoly's rates. The regulators determined that Monopoly was taking advantage of being the only insurer offering the line by charging more than double the actuarial cost of the coverage. Which regulatory rating objective was Monopoly violating?
A) Rates must be adequate.
B) Rates should encourage loss control.
C) Rates must not be excessive.
D) Rates must not unfairly discriminate.

Question 2

Which of the following statements about schedule rating is (are) true?

I. It involves the determination of a basis rate for each exposure, which is then modified by credits or debits.
II. It is based on the assumption that certain physical characteristics of the insured's operations will influence the insured's future loss experience.
A) I only
B) II only
C) both I and II
D) neither I nor II