The Problem of Moral Hazard Arises Because

question 44

Multiple Choice

The problem of moral hazard arises because

• A)life is full of all sorts of risks.
• B)after people buy insurance,they have less incentive to be careful about their risky behavior.
• C)a high-risk person is more likely to apply for insurance than is a low-risk person.
• D)insurance companies go to great effort to avoid paying claims to their policy holders.

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Definitions:

Immediate Effects

Direct and instant outcomes or impacts resulting from a specific action or event.

Senior Executives

High-level managers or officers in an organization, responsible for making strategic decisions.

Soliciting

The act of seeking or requesting information, feedback, or support from individuals or groups.

Stakeholders

Individuals or groups that have an interest in an organization's activities, decisions, and success, including employees, customers, suppliers, and shareholders.