XYZ Insurance has its home office in a state with a population that consists predominantly of people of a particular ethnic origin. XYZ wanted to encourage state residents to buy insurance policies, so it filed rates with the state insurance regulators that extended a flat 70 percent discount to all applicants of the predominant ethnic origin, after considering other rating factors.Explain why the state regulators might not approve these rates based on each of the following rating objectives.a. Rates must be adequate to pay all claims and expenses.b. Rates must not be unfairly discriminatory.

XYZ Insurance has its home office in a state with a population that consists predominantly of people…

Answered: XYZ Insurance has its home office in a…

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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XYZ Insurance has its home office in a state with a population that consists predominantly of people of a particular ethnic origin. XYZ wanted to encourage state residents to buy insurance policies, so it filed rates with the state insurance regulators that extended a flat 70 percent discount to all applicants of the predominant ethnic origin, after considering other rating factors.

Explain why the state regulators might not approve these rates based on each of the following rating objectives.

a. Rates must be adequate to pay all claims and expenses.

b. Rates must not be unfairly discriminatory.

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