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What Is a Per Diem fee Retaining to automobile insurance?

Automobile insurance companies charge lower rates to married individuals than they do to unmarried...?

  • Automobile insurance companies charge lower rates to married individuals than they do to unmarried individuals. What economic reason is there for such a practice? Is it fair? A. Automobile insurance suffers from the free rider problem. To offset this problem, insurance companies estimate the probability of accidents by categorizing individuals. B. Insurance companies use price discrimination to take advantage of the fact that unmarried individuals have a lower elasticity of demand. This is simply a strategy for maximizing profit. C. To keep rates to a minimum, insurance companies estimate the probability of accidents by categorizing individuals. One would expect that, statistically, married drivers are safer drivers. D. There is no good economic reason for the difference in prices between married an unmarried people. Further, this practice is illegal.

  • Answer:

    C

Jj Bones at Yahoo! Answers Visit the source

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no

D.

C with a large helping of D thrown in. Married drivers can be shown to be safer than unmarried drivers. Especially if this is done to maximize profits. Include all unmarried drivers vs all married drivers. Unmarried drivers are generally younger, a bit more wild, and have a higher incidence rate of accidents. If you were to compare only married and unmarried 35 year olds, I think you'd see no differences. (Unsubstantiated guess, I'll admit.) Statistics can always be twisted to assure the outcome that is desired. Insurance companies have been doing that for decades.

Douglas S

I would go for A. It realizes the free rider problem.Unmarried individual will have more chance to be a free rider than the married customer.That is why it is fair to decrease the fee for the married couple.

Anjaree

C. Data and statistics are a wonderful thing. Do the other answers even make sense?

Jeff

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