As a result, of adverse selection problems in the fire insurance market, it is likely that over time

A) fewer low-risk people will be insured.
B) fewer high-risk people will be insured.
C) fewer low-risk and high-risk people will be insured.
D) more low-risk people will be insured.

Question

Mitchell Romano · Accepted Answer

Final Answer : A, Explanation :  Adverse selection in the fire insurance market leads to a situation where insurers find it difficult to distinguish between high-risk and low-risk customers. Consequently, they might set premiums that are too high for low-risk individuals, discouraging them from buying insurance. This results in a higher proportion of high-risk individuals in the insured pool, making it less likely for low-risk individuals to be insured.

As a result, of adverse selection problems in the fire insurance market, it is likely that over time

A) fewer low-risk people will be insured.
B) fewer high-risk people will be insured.
C) fewer low-risk and high-risk people will be insured.
D) more low-risk people will be insured.

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Learning Objectives

Learning Objectives

Related questions

As a result, of adverse selection problems in the fire insurance market, it is likely that over timeA) fewer low-risk people will be insured.B) fewer high-risk people will be insured.C) fewer low-risk and high-risk people will be insured.D) more low-risk people will be insured.

Definitions

Learning Objectives

Learning Objectives

Related questions

As a result, of adverse selection problems in the fire insurance market, it is likely that over time

A) fewer low-risk people will be insured.
B) fewer high-risk people will be insured.
C) fewer low-risk and high-risk people will be insured.
D) more low-risk people will be insured.