In: Finance
______________ is the problem faced by insurance companies because individuals who are more likely to have claims are also more likely to purchase insurance. (2 points)
a. Moral hazard
b. Adverse selection
c. Fee-for-Service
d. Managed Care
Option B is correct
Adverse Selection
Explanation:
Adverse selection is tendency of persons with risky lifestyle to have insurance, and companies fight this tendency by increasing premiums or limiting claim amount.