1. Why do you think that moral hazard exist in insurance markets and how can it...

1. Why do you think that moral hazard exist in insurance markets and how can it be reduced?

Expert Solution

Moral hazard occurs when one party or individuaI takes risk Knowing that if something happens, the third party will bear the burden.
Moral harzards occur in insurance markets when :-

The insurance companies charge higher rates to more risk prone customers.
Insured customers are more likely to take greater risks, as they know that their claim will be paid by their cover.

These moral harzards can be removed by :-

Use of co-pay and co-deductives :- the insurance companies must persuade the customers to atleast pay for part of the service they receive.
Penalize bad behaviour :- the insurance company must penalize any unhealthy behaviour to mitigate losses to moral hazard.
Good claims metrices :- the insurance markets must frequently use metrices that can determine the existence of moral hazard.

Rahul Sunny answered 2 years ago

Why do you think that moral hazard exist in insurance markets and how it can be...

Why do you think that moral hazard exist in insurance markets and how it can be reduced?

Discuss How moral hazard exists in insurance markets.

1. How do deductibles affect moral hazard? 2. How can insurance companies attempt to prevent or...

1. How do deductibles affect moral hazard? 2. How can insurance companies attempt to prevent or minimize moral hazard other than deductibles? 3. What are the risks of using only the data that the policyholder provides the insurance company? 4. What risks does a policyholder take on when they purchase insurance?

Describe two forms of moral hazard in health insurance markets.

1. In terms of insurance, what is moral hazard and what do insurance companies do to...

1. In terms of insurance, what is moral hazard and what do insurance companies do to try to offset it? 2. How did the drop in the birth rate cause problems for Social Security, and how would raising the benefits age help save the system? 3. How did finance companies misrepresenting the risk of adjustable-rate mortgages and offering second mortgages for more than a home's value contribute to the financial crisis? 4. . What exactly is the role of...

Explain the moral hazard problems associated with (1) deposit insurance and (2) insurance companies. How can...

Explain the moral hazard problems associated with (1) deposit insurance and (2) insurance companies. How can they be overcome?

Explain in detail why and how moral hazard impacts the insurance system?

What is moral hazard? How do financial institutions deal with moral hazard?

Explain how moral hazard and adverse selection each affect insurance markets. For concreteness, focus on the...

Explain how moral hazard and adverse selection each affect insurance markets. For concreteness, focus on the auto insurance market. What are the implications of these concepts for the kinds of policies that are available for consumers? How do insurers and markets try to “solve” or overcome the issues presented by these concepts? Use graphical analysis when appropriate.

1. Difference between Moral Hazard and Morale Hazard(Attitudinal hazard), Why Moral Hazard is important concept to...

1. Difference between Moral Hazard and Morale Hazard(Attitudinal hazard), Why Moral Hazard is important concept to insurance company? Give an example 2. The high cost of liability insurance has made some people believe that this kind of insurance should be eliminated because the cost is too high for the society. Do you agree with it? ch. 2 & 19

Question