What impact is likely to occur when there is an increase in the number of insurers offering a particular type of insurance?

When the number of insurers offering a particular type of insurance increases, it typically leads to more competition in the market. This heightened competition often results in insurers striving to attract customers by offering more favorable terms, which can include lower premiums.

When multiple insurers are vying for the same pool of potential policyholders, they may lower their prices to attract more business. This process is known as "price competition," and it generally causes premiums to decrease. The basic economic principle at play here is that as supply increases (in this case, the supply of insurance providers), prices tend to fall if demand remains constant.

In contrast, if there were fewer insurers in the market, each company might have more power to set higher premiums since the competition is limited. Additionally, higher premiums would typically be observed in scenarios where insurers face increased risks or costs, which is less likely when more businesses enter a market, thereby increasing options for consumers.

Overall, the increase in the number of insurers generally results in lower premiums, as they compete for market share by making their offerings more appealing to consumers.