in 2009, the us state of hawaii enacted rate - stability regulations (rsrs), compelling insurance companies…

in 2009, the us state of hawaii enacted rate - stability regulations (rsrs), compelling insurance companies to notify to reinsurers (the periodic fee policies pay to maintain insurance policies) after policies are in effect. rsrs are effective at protecting existing policyholders from price increases, but they also create a risk - selection problem. when premiums are an important risk - mitigation tool for insurers, rsrs may lead some insurers to scale back or entirely cease selling new policies to the affected market, thereby reducing the competitive pressure that typically restrains premium prices for new policies. thus, hawaiis rsrs may ____. which choice most logically completes the text? a. benefit policyholders at the expense of non - policyholders seeking to acquire policies b. cause a significant price volatility once policies are in effect and increase risks for policyholders c. prevent large increases in premium prices for new policies despite leading to fewer insurers offering such policies in the affected market d. create incentives for insurers to forgo risks they are either current or prospective policyholders

in 2009, the us state of hawaii enacted rate - stability regulations (rsrs), compelling insurance companies to notify to reinsurers (the periodic fee policies pay to maintain insurance policies) after policies are in effect. rsrs are effective at protecting existing policyholders from price increases, but they also create a risk - selection problem. when premiums are an important risk - mitigation tool for insurers, rsrs may lead some insurers to scale back or entirely cease selling new policies to the affected market, thereby reducing the competitive pressure that typically restrains premium prices for new policies. thus, hawaiis rsrs may ____. which choice most logically completes the text? a. benefit policyholders at the expense of non - policyholders seeking to acquire policies b. cause a significant price volatility once policies are in effect and increase risks for policyholders c. prevent large increases in premium prices for new policies despite leading to fewer insurers offering such policies in the affected market d. create incentives for insurers to forgo risks they are either current or prospective policyholders

Answer

Explanation:

Step1: Understand the role of RSSRs

RSSRs are designed to protect existing policy - holders from price increases due to new policies being issued. They are a risk - mitigation tool for insurers.

Step2: Analyze each option

Option A

If policy - holders are seeking to acquire policies at the volatility of new policies being issued, this goes against the purpose of RSSRs which is to stabilize rates for existing policy - holders. RSSRs are not about helping new policy - seekers in this context.

Option B

The main goal of RSSRs is to prevent large increases in premium prices for existing policy - holders. So, it is likely that they can deter new policies from being issued at higher risk for policy - holders. This option aligns with the function of RSSRs.

Option C

RSSRs are focused on protecting existing policy - holders, not on the situation of new policies having lower premiums. Their main concern is not the premium levels of new policies in relation to attracting new customers.

Option D

RSSRs are not about protecting future policy - holders in the context of current or prospective insurers. They are about the stability for existing policy - holders.

Answer:

B. prevent large increases in premium prices for new policies despite leading to lower insurers offering such policies in the affected market