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- In order to remain competitive, insurance companies must successfully address: A. Adverse Selection B. Moral Hazard C. Accurate underwriting (pricing of risk) D. All of the above E. None of the abovewhich of the strategies is effective in reducing moral hazard? gatekeeping cost sharing prospective payment all of the aboveSuppose in a given state's new insurance marketplace, with community rating and no restrictions on who can buy at the community rate, the risk pool (distribution of expected health costs) is as follows: 30% of eligible enrollees' expected health costs = $1,000 (per year)65% of eligible enrollees' expected health costs = $2,0005% of eligible enrollees' expected health costs = $10,000 Now suppose one insurer, and one insurer only, were allowed to offer any premium it wanted to any potential buyer and to exclude those it did not want to cover? What premium would they likely charge and who would they sell to and who would they exclude? What would happen to the other insurers? Does this help you see why the ACA was written to apply to all insurers?
- Distinguish between adverse selection and moral hazard as they relate to the insurance industry.What is the mostly commonly used utility functions for the following and why: Risk Aversion Risk Seeking Risk NeutralQUESTION 36 In order to remain competitive, insurance companies must successfully address: A. Adverse Selection B. Moral Hazard C. Accurate underwriting (pricing of risk) D. All of the above E. None of the above
- Differentiate between adverse selection and moral hazard problems with one examplesThe owner of a chain of bicycle stores are uncertain whether on of their shops is covered under their commercial general liability policy. To verify coverage, they should check which of the following policy provision? Condition Declaration other insurance insuring agreementProvide an example of Moral Hazard from personal observation or experience.