Identify and explain the two ways that an insurance company

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Reference no: EM133425612

Questions: Betty and Barney, are considering buying a new car and are arguing over how the kind of car and the cost will impact the cost of their physical damage cover. Betty says the cost of the doesn't matter. Barney says the cost of the car is absolutely important - the more expensive the car, the more the physical damage cover will cost.

a) Identify and explain the two ways that an insurance company may price the physical damage covers

b) Explain why Betty might be correct and they may pay more for physical damage for an inexpensive car than for an expensive car, depending on the method their insurer uses to price physical damage covers

b) Give Barney three (3) reasons why the system that may charge more for a cheaper car is actually more fair than using the cost of the car as the basis for premiums

Reference no: EM133425612

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