Which of the following statements about risk-bearing financial institutions is not correct?
A) They are a good example of creating self-insurance by the customers of these institutions.
B) They allow its customers to transfer their financial risks to the institution for a fee.
C) They capitalize on their size to mitigate risks.
D) They finance the cost of any losses by the fees they get from their customers.
A
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Indicate whether the statement is true or false
What is the fundamental function of the insurance company—in other words, what is it the insurance company does that makes the insurance mechanism work?
A) It pools those insureds having similar risks, and predicts the losses that those in the pool will suffer. B) It pools any insureds who wish to purchase insurance, and attempts to predict the losses that those in the pool will suffer. C) It redistributes government subsidies to those who have suffered catastrophes. D) It eliminates the process of underwriting in order to sell insurance to as many people as possible, thus providing insureds with a huge quantity discount.