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Analyzing Insurance Premium Changes and Real Output
An auto insurance company increases its standard annual premium by $100. Compare how national statisticians should treat this $100 increase when calculating real economic output under two different scenarios: a) The increase is solely due to rising administrative costs for the insurer. b) The increase is solely because the policy now includes a new benefit, such as comprehensive glass coverage, that was not previously offered.
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Introduction to Macroeconomics Course
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Interpreting Insurance Premium Changes in GDP
Suppose the average price for a standard health insurance policy in a country increases by 8% in one year. Economic statisticians determine that this increase is entirely because the policy now includes coverage for a wider range of preventative care services. How should this 8% increase be primarily recorded when calculating the change in the nation's real economic output?
An auto insurance company increases its average annual premium from $1,000 to $1,100. At the same time, it adds a new 'free roadside assistance' benefit to the policy, which government economists independently value at $60. How should the total $100 increase in the premium be broken down when measuring the change in the nation's real economic output?