Final answer:
Insurance agents must issue a receipt when collecting premiums, which are payments made to insurance companies. This helps maintain clear and accurate financial records. Charging an actuarially fair premium to a risk group as a whole can cause imbalances due to varying risk levels.
Step-by-step explanation:
Whenever the agent collects premiums, the agent must issue a receipt. In insurance, a premium is the payment made to an insurance company by policyholders. The receipt serves as a proof of the transaction and assures the policyholder that their premium has been received. This is essential for maintaining accurate records for both the insurance company and the customer. Additionally, issuing a receipt can help prevent financial disputes and is part of standard professional practice in the insurance industry.
Concerning risk groups, if an insurance company charges the actuarially fair premium to the group as a whole, rather than to each group separately, there could be an imbalance. Different subsections within the group might have varying levels of risk associated with them. To maintain fairness and solvency, insurers typically assess and set premiums based on the specific risk levels of different subgroups, otherwise, the company may face a potential financial burden or moral hazard issues.