Which of the following practices mitigates moral hazard?
I. A health insurance company's policy requires a $500 deductible and a 20% coinsurance rate.
II. Progressive Insurance offers drivers a discount for using a black box that records miles driven and the number of sudden stops.
III. Homeowner insurance does not cover claims arising from backyard swimming pools.
A) I
B) I, II, and III
C) III
D) II and III

Question

Quizplus · Accepted Answer

I and II directly address moral hazard by making the insured party bear some of the cost, encouraging them to act more cautiously. III indirectly mitigates moral hazard by excluding coverage for high-risk activities, encouraging homeowners to be more cautious or avoid certain risks.

Which of the Following Practices Mitigates Moral Hazard