Final answer:
True, insurance companies use cost-benefit analysis to consider new products. They weigh the marginal costs against the marginal benefits to make informed decisions about product introductions and pricing.
Step-by-step explanation:
Insurance companies indeed use cost-benefit analysis to determine the viability of introducing a new product to the market. This is true. They assess the marginal costs, such as the extra cost of adding one more policy to their portfolio, against the marginal benefits, such as potential profits from the new policies sold. This strategic analysis helps them decide whether the financial returns justify the associated costs and risks. A cost-benefit analysis typically involves drawing up a T-chart where the costs of bringing a new insurance product to market are listed on one side, and the benefits are listed on the other. By thoroughly examining the trade-offs between the two, insurance companies can make informed decisions about product development and pricing strategies.