Pricing Insurance Policies Is Made Difficult Because Buyers Have More

question 79

Multiple Choice

Pricing insurance policies is made difficult because buyers have more information than sellers.This difficulty is an example of

• A)moral hazard.
• B)adverse selection.
• C)asymmetric information.
• D)the free-rider problem.

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Definitions:

Statutory Law

Law enacted by a legislative body, such as Parliament or Congress, distinct from case law or common law.

Common Law

A body of law developed through court decisions and case law, rather than through legislative statutes or executive action.

Unaudited Financial Statements

Financial reports not examined and verified by an independent third party (an auditor).

Liable

Responsible by law; legally answerable.