Question

    What is the impact of inflation on premium calculations?

    A Inflation has no impact on premium calculations. Correct Answer Incorrect Answer
    B Inflation only affects the cost of claims, not the exposure Correct Answer Incorrect Answer
    C Inflation affects both the cost of claims and the exposure, which must be considered Correct Answer Incorrect Answer
    D Inflation primarily affects the insurer's expenses, not the cost of claims Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    The correct answer is C. Inflation affects both the cost of claims and the exposure, which must be considered. Inflation increases the cost of repairs, medical treatments, and other expenses related to claims. It also can increase the value of insured property, impacting the exposure.

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