An Insurance Management Tool to Reduce Moral Hazard Is to ________

question 6

Multiple Choice

An insurance management tool to reduce moral hazard is to ________.

• A)charge the same premium for different risks
• B)limit the amount of insurance provided
• C)reduce the deductible to zero
• D)prohibit coinsurance

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Definitions:

Fair Value

An estimated market value of an asset or liability based on current market prices or valuations.

Stock Investments

The purchase of shares in a company with the expectation of generating income or capital gains.

Insignificant Influence

Refers to a situation in which an investor does not have enough stake or power in an investee company to affect its decisions or policies.

Equity Method Investments

An accounting technique used to record investments in which the investor holds significant influence over the investee, usually recognized when owning 20-50% of the voting stock.