In the Case of an Insurance Policy,________ Occurs When the Existence

question 36

Multiple Choice

In the case of an insurance policy,________ occurs when the existence of insurance encourages the insured party to take risks that increase the likelihood of an insurance payoff; ________ occurs when those most likely to get large insurance payoffs are the ones who want to purchase insurance the most.

• A) moral hazard; insurance market discrimination
• B) moral hazard; insurance segregation
• C) moral hazard; adverse selection
• D) adverse selection; moral hazard

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Definitions:

Specific Brand

A particular brand that is identified or specified, often distinguished by its unique name, logo, and product attributes.

Order Instrument

A financial document or tool that directs the payment of money, often used in transactions to specify the payer and payee.

Negotiable

Capable of being discussed or modified in order to reach an agreement, or in terms of financial instruments, able to be transferred or assigned from one party to another.

Identified Person

An individual who has been recognized or named in a specific context or for a particular purpose.