Which of the following statements is correct?
A)A high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection.
B)A low-risk person is more likely to apply for insurance than a high-risk person because a low-risk person would benefit more from insurance protection.
C)Insurance companies can fully guard against the problem of adverse selection,but they cannot fully guard against the problem of moral hazard.
D)Insurance companies can fully guard against the problem of moral hazard,but they cannot fully guard against the problem of adverse selection.

Question

Quizplus · Accepted Answer

A high-risk person is more likely to apply for insurance because they face a higher likelihood of experiencing a loss that could lead to financial hardship. Insurance provides more benefit and protection to those who face higher risk, so it makes sense that they would be more likely to seek out coverage. Low-risk individuals may not see the same need for insurance, as their chances of experiencing a significant loss are lower.

Which of the Following Statements Is Correct