1. Explain how an insurance company can take risk from millions of people but re

1. Explain how an insurance company can take risk from millions of people but reduce the risk to the insurer
2. Two people buy a life insurance policy. The policies are identical. Except that one is a man and the other is a woman, the two present exactly the same risk to the insurer (e.g., same age, same health history, etc.). The woman will pay a lower premium than the man.
a. Why?
b. Is that fair?
c. Do you understand that if the same two folks buy a lifetime annuity, the woman will get a lower monthly payment from the insurer than the man will? Why?
3. Explain the terms “financial intermediation” and “financial disintermediation.”
Which one is bad for insurers?
4. Distinguish between a “valued” policy and an “indemnification” policy.
Give an example of each.
Cite your sources

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