________is the problem of separating good from bad drivers
A)Moral hazard
B)Adverse selection
C)Decision making
D)None of the above

Question

________is the problem of separating good from bad drivers​
A)​Moral hazard
B)Adverse selection
C)Decision making
D)​None of the above

Quizplus · Accepted Answer

Adverse selection refers to the problem of asymmetric information where one party has more information than the other, leading to the other party making a bad decision. In the case of insurance, adverse selection refers to the problem of separating good from bad drivers. This is because bad drivers are more likely to apply for insurance than good drivers, leading to the insurance company having a higher risk of payouts. To mitigate this risk, insurance companies may use several methods such as risk-based pricing and underwriting.

________Is the Problem of Separating Good from Bad Drivers​

________Is the Problem of Separating Good from Bad Drivers