Which of the Following Is True Regarding the Reduction of the Impact

question 24

Multiple Choice

Which of the following is true regarding the reduction of the impact of moral hazard by insurers?

• A) It is not possible for insurers to reduce the risk of moral hazard, and this is seen as a risk of doing business.
• B) Insurers refuse to pay claims believed to result from the effects of moral hazard.
• C) The only avenue for insurers seeking to reduce moral hazard is through the use of deductibles.
• D) The only avenue for insurers seeking to reduce moral hazard is through refusing to insure those who have previously made multiple insurance claims.
• E) Insurance companies lessen the impact of moral hazard by requiring that individuals with insurance make co-payments or pay a deductible.

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Definitions:

Put Option

A financial agreement that permits the holder to choose whether to sell a specific quantity of a principal asset at a fixed price during an established period, without any mandatory commitment.

Keebler, Inc.

An American cookie and former cracker manufacturer, known for its elfin characters and cookie varieties.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's profits or losses.

Convertible Bond

A financial instrument that can be converted by the bondholder into a predetermined quantity of the issuer's company shares at certain intervals throughout the bond's life, generally at the bondholder's discretion.