Insurance companies deal with the problems created by moral hazard by:

Question

Quizplus · Accepted Answer

By requiring a deductible, insurance companies provide an incentive for the insured individuals to take reasonable precautions to avoid losses and reduce moral hazard. This way, the insured individuals are less likely to file fraudulent claims or engage in risky behavior that could lead to losses, as they will have to cover some of the costs themselves. This helps insurance companies prevent losses, keep premiums competitive, and maintain financial stability.

Insurance Companies Deal with the Problems Created by Moral Hazard