Business, 05.05.2020 04:58 kahmir15

Why is an insurance company likely to behave as if it is risk neutral even if its managers are risk-averse individuals? A. According to the law of large numbers, people operating collectively, like the employees at an insurance company, will likely behave as if risk neutral because no one individual is held accountable for any losses. B. By applying the law of small losses, insurance companies can assure themselves that over many outcomes, the total premiums paid to the company will be equal to the total amount of money paid out to compensate the losses of the insured. Individuals are typically not in the same position. C. By applying the law of large numbers, insurance companies can assure themselves that over many outcomes, the total premiums paid to the company will be equal to the total amount of money paid out to compensate the losses of the insured. Individuals are typically not in the same position. D. According to the law of small losses, people operating collectively, like the employees at an insurance company, will likely behave as if risk neutral because no one individual is held accountable for any losses.

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Why is an insurance company likely to behave as if it is risk neutral even if its managers are risk-...