When the Average Buyer of an Insurance Policy Is Likely

question 13

Multiple Choice

When the average buyer of an insurance policy is likely to have higher risk than others in his class,this is known as

• A) adverse selection.
• B) moral hazard.
• C) asymmetric information.
• D) an HMO.

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, without having control or joint control over those policies.

Cost Method

An accounting approach used for investments, where the investment is recorded at its acquisition cost and adjustments are made for dividends received and permanent declines in value.

Equity Method

An accounting technique used when a company invests in a firm and has significant influence over it, recognizing its share of profit or loss in its own financial statements.

Significant Influence

Refers to the power to participate in the financial and operating policy decisions of an investee but is not control over those policies.