Question

Why do high guarantees contribute to the riskiness of a product?

a.

They decrease the potential for losses.

b.

They increase the likelihood of adverse future circumstances.

c.

They stabilize the product's performance.

d.

They reduce the need for risk management.

Answer: (b).They increase the likelihood of adverse future circumstances. Explanation:High guarantees increase the risk of loss for the company because they commit the insurer to significant payouts, especially in adverse future circumstances. This heightened exposure to adverse events makes the product riskier.

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Q. Why do high guarantees contribute to the riskiness of a product?

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