If Insurance Companies Are Required to Offer Coverage to All

Multiple Choice

If insurance companies are required to offer coverage to all interested people, it is said that premiums for each person will be increased. Assume that the insurance market is perfectly competitive. What is the major reason for raising the premium?

A) The insurance companies take advantage of the increased demand and collude.
B) Medical services are more expensive because of increased demand.
C) Less healthy people join the pool of insured and hence increase the risk and the premium.
D) None of the statements is correct.