The tendency for unhealthy people to seek life insurance rates is an example of: a) fundamental...

The tendency for unhealthy people to seek life insurance rates is an example of:

a) fundamental risk
b) morale hazard
c) adverse selection
d) moral hazard

Solutions

Expert Solution

Answer: adverse selection

Adverse selection occurs when the applicants with higher than the average chances of loss seeks insurance at standard rate. In the case of insurance, adverse selection is the tendency of those in high risk lifestyles and dangerous jobs to get life insurance . In order to fight adverse selection, insurance companies decrease exposure to large claims by raising premiums or less coverage.

keosha answered 1 year ago

Next > < Previous

Related Solutions

Adverse selection in a competitive market for health insurance causes A. relatively unhealthy people to not...

Adverse selection in a competitive market for health insurance causes A. relatively unhealthy people to not buy insurance, and premiums to rise creating market failure. B. only relatively healthy people to buy insurance, and premiums to fall creating market failure. C. relatively healthy people to not buy insurance, and premiums to rise creating market failure. D. relatively unhealthy people to buy insurance, and premiums to fall creating market failure.

When firms participate in group health insurance for all employees, it: A) raises rates for unhealthy...

When firms participate in group health insurance for all employees, it: A) raises rates for unhealthy people. B) prevents unhealthy people from "selecting out," to the detriment of healthy people. C) increases the amount of information available to insurers about the population. D) may lower rates for all people to the extent that it keeps healthy people in the pool. E) raises rates for everyone, because it brings unhealthy people into the pool.

A group of 10 people seek out an insurance company to underwrite health insurance for its...

A group of 10 people seek out an insurance company to underwrite health insurance for its members. The expected medical spending for this group is $50,000, or 5,000 per person on the average. An additional 10 people join the group who have expected medical spending of $10,000 per person on average. The premium (incorporating net loading costs of 5 percent) will be approximately a. $7,200 b. $7,275 c. $7,500 d. $7,875 e. None of the above

Suppose there are two types of people: Healthy and Unhealthy. Itcosts more toinsure unhealthy...

Suppose there are two types of people: Healthy and Unhealthy. It costs more toinsure unhealthy people because they are likely to incur more medical bills.Suppose the marginal cost (MC) of providing an insurance policy is $1,000 for ahealthy person and $4,000 for an unhealthy person. Assume healthy people arewilling to pay $1,500 for health insurance, and unhealthy people are willing to pay$5,000. Suppose the insurance company charges P = MC so as to earn zero profit. a) With complete information,...

a- There appears to be a growing tendency for companies to seek competitive advantage by applying...

a- There appears to be a growing tendency for companies to seek competitive advantage by applying customer focused strategies. This customer focus is evident from a number of companies including customer orientation in their corporate mission statement. 1-Explain the concept of customer profitability analysis. Give examples of cost drivers used in this analysis 2-How does the life time analysis differ from the basic customer profitability approach? Explain 3-Show reasons why might an organization choose to keep an apparently unprofitable customer....

A study conducted at a major university indicates that the tendency among undergraduates to seek the...

A study conducted at a major university indicates that the tendency among undergraduates to seek the assistance of helper differs by ethnic group. You select 25 subjects each from two different ethnic groups or business majors and count the number who sought help. In ethic group A, 11 sought out helpers at some point. In ethnic group B, 17. What are the frequency expected values for each group? Do results support the earlier study? What does the alternate hypothesis suggest...

There appears to be a growing tendency for companies to seek competitive advantage by applying customer...

There appears to be a growing tendency for companies to seek competitive advantage by applying customer focused strategies. This customer focus is evident from a number of companies including customer orientation in their corporate mission statement. 1-Explain the concept of customer profitability analysis. Give examples of cost drivers used in this analysis 2-How does the life time analysis differ from the basic customer profitability approach? Explain 3-Show reasons why might an organization choose to keep an apparently unprofitable customer. 4-...

Discussion: Central Tendency and Variability Understanding descriptive statistics and their variability is a fundamental aspect of...

Discussion: Central Tendency and Variability Understanding descriptive statistics and their variability is a fundamental aspect of statistical analysis. On their own, descriptive statistics tell us how frequently an observation occurs, what is considered “average”, and how far data in our sample deviate from being “average.” With descriptive statistics, we are able to provide a summary of characteristics from both large and small datasets. In addition to the valuable information they provide on their own, measures of central tendency and variability...

Calculate the Probability Binomial Distribution An insurance company sells life insurance policies to 5 people with...

Calculate the Probability *Binomial Distribution* An insurance company sells life insurance policies to 5 people with the same age (35) and the same health condition (Excellent). If the Insurance company was estimating at 66% the probability of a person of that age and health condition should live 30 more years. What is the probability that 30 years after buying the policy: a. All 5 are alive b. 4 out of 5 have died c. No more than 3 survive d....

A life insurance policy is an example of an intended beneficiary contract. True or False

Subjects