Final answer:
An insurer can evaluate their operational efficiency by considering factors such as the balance between payments and claims, the rate of return from investments, and the control of administrative costs.
Step-by-step explanation:
An insurer can evaluate how efficiently they are operating based on several factors. One important factor is whether the average person's payments into insurance over time cover the average person's claims, the costs of running the company, and leave room for the firm's profits. This indicates that the insurer is able to balance their income and expenses effectively.
Another factor is the rate of return from investing the funds or reserves that the insurance company receives. If the company is able to earn a good rate of return from these investments, it shows that they are managing their finances well and generating additional income.
Lastly, the administrative costs of running the business can also give an idea of how efficiently the insurer is operating. If these costs are kept under control and are proportionate to the income generated, it suggests that the insurer is operating efficiently.