What equation defines product risk in insurance?

The equation that defines product risk in insurance is best represented by the combination of customer risk, product complexity, sales risk, and service risk. This comprehensive formulation captures the various dimensions that can impact the overall risk associated with an insurance product.

Customer risk reflects the potential for adverse outcomes related to the profile of the policyholder, including their insurability and claims history. Product complexity pertains to the intricacies involved in designing and offering the insurance product, which can increase the likelihood of misunderstanding or mismanagement. Sales risk addresses the potential issues that might arise during the marketing and selling process, such as misrepresentation or inadequately meeting customer needs. Finally, service risk is concerned with the quality and reliability of post-sale support, which can affect customer retention and satisfaction.

By integrating these factors, the formulation in choice B provides a holistic view of product risk, making it critical for insurance professionals to consider each component when evaluating and managing the risks associated with their products.