If people get higher pay from insurance than their premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse seletion? How will an insurance company deal with these problems?
If people get higher pay from insurance than their premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse seletion? How will an insurance company deal with these problems?
Chapter7: The Market For Health Insurance
Section: Chapter Questions
Problem 11QAP
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If people get higher pay from insurance than their premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse seletion? How will an insurance company deal with these problems?
Expert Solution
Step 1
Moral Hazard:
Moral hazard is a situation, which arises when a person an insured person takes greater risk, knowing that if any loss occurs then it will be bear by the third person.
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