A life insurance company requires new applicants to have a medical exam prior to writing the insurance policy. This requirement is an example of
A)signaling.
B)screening.
C)moral hazard.
D)adverse selection.

Question

Quizplus · Accepted Answer

The requirement of a medical exam prior to writing the insurance policy is an example of screening. The life insurance company is trying to screen out applicants who may be at a higher risk of death or illness, as they would be more costly for the company to insure. A medical exam can reveal underlying health conditions that could affect the applicant's mortality risk, allowing the company to adjust their premiums or deny coverage if the risk is too high.

A Life Insurance Company Requires New Applicants to Have a Medical