Question
In: Economics
An insurance company decides to offer individuals insurance against losing their jobs. What problems is it...
An
insurance company decides to offer individuals insurance against
losing their jobs. What problems is it likely to encounter?
Solutions
Expert Solution
The insurance company will face many problems if it decides to offer individuals insurance against losing their jobs.
1. It will need to decide how much premium to be paid by the individuals as it will depend on the kind of job they are doing and the income they are earning. It will be difficult to anticipate the impact of it.
2. It will be difficult to frame terms and conditions which suggest factors that forced the individual to leave a job and determining if the cause is unethical or not.
3. Many companies offer the employees severance pay which guarantees some income to the employee until he/she gets a new job. It would be difficult for insurance companies to grow in the presence of severance pay.
4. The insurance company will need to decide the maximum time period for which the individual will get paid if he/she loses his/her job.
Rahul Sunny answered 2 years agoRelated Solutions
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