Which of the following make(s)insurance premiums higher than otherwise?
A)adverse selection and moral hazard
B)adverse selection,but not moral hazard
C)moral hazard,but not adverse selection
D)neither adverse selection nor moral hazard

Question

Quizplus · Accepted Answer

Adverse selection occurs when individuals who are more likely to file claims are the ones who purchase insurance, leading to an imbalanced risk pool and higher premiums. Moral hazard refers to the tendency of insured individuals to engage in riskier behavior or file more claims simply because they have insurance, which increases the overall cost of insurance and drives up premiums. Therefore, both adverse selection and moral hazard contribute to making insurance premiums higher than they would be otherwise.

Which of the Following Make(s)insurance Premiums Higher Than Otherwise