Which statement describes a unique characteristic of how insurance pricing works, where rates are set before actual costs are known?

Which statement describes a unique characteristic of how insurance pricing works, where rates are set before actual costs are known?

• A. Insurer set rates before the actual costs are known
• B. Rates are based on actual costs after losses occur
• C. Rates are identical across all lines
• D. The regulatory process waits until losses are observed

Answer: (A)