Long Life Insurance Company insures substandard risks. Which of the following will it employ to compensate for the higher death rates it expects?

The correct answer is that Long Life Insurance Company will charge increased premiums for substandard risks as a way to compensate for the higher death rates it expects.

Substandard risks refer to individuals who present a greater likelihood of filing a claim due to health issues, lifestyle choices, or other risk factors. Because these individuals are statistically more likely to experience claims, insurance companies need to manage their financial exposure by adjusting the premiums accordingly. By charging higher premiums, the insurer can ensure that the funds collected from these policies are sufficient to cover the anticipated claims, thereby maintaining the company’s financial stability.

In contrast, simply issuing binding receipts or requiring attending physician's statements does not directly address the need to adjust for increased risk. Binding receipts may establish coverage but do not influence the premium structure. Attending physician's statements provide valuable health information but do not inherently mitigate risk or adjust premiums.

Using the Medical Information Bureau (MIB) can assist in underwriting by providing background information on applicants, but it does not inherently lead to compensation for risk through premium adjustments. While useful for assessing risk, the MIB's role is primarily informational rather than a direct response to compensating for higher death rates.

Therefore, charging increased premiums is the definitive strategy employed to manage the financial implications of