Principle: An insurance policy is underpriced if costs exceed total income from premiums.
Fact: Primiums can be invested and earn returns.
Conclusion: An underpriced policy may not be a net loss.
Ask for assumption.
The conclusion that underpriced policy may not be a net loss is based on the fact that you could invest the premium, thus it assumes that you would have enough premiums to invest.
(A) No insurance policies are deliberately underpriced in order to attract customers to the insurance company offering such policies.
(B) A policy that represents a net loss to the insurance company is not an underpriced policy in every case.
We don't know. We know he said every A is not B. But he didn't say every B is not A.
(C) There are policies for which the level of claims per year can be predicted with great accuracy before premiums are set.
That's not the point. You could do the balance sheet afterwards and find if a policy is underpriced or what. And you can also determine if it is a net loss after some time. You don't need to assume the accuracy of prediction ahead of time to determine both concepts.
(D) The income earned by investing premium income is the most important determinant of an insurance companyâ€™s profits.
It's not discussed at all. Irrelevant.
(E) The claims against at least some underpriced policies do not require paying out all of the premium income from those policies as soon as it is earned.
Keep on asking, and it will be given you;
keep on seeking, and you will find;
keep on knocking, and it will be opened to you.