Company A and Company B are two car insurance companies in a city.Company A pays 100 percent of the money required for repair in case of an accident,while Company B pays 70 percent of the total money required.A research agency has found that Company A's customers have more accidents.Which of the following explains this difference?

Question

Quizplus · Accepted Answer

Moral hazard explains this difference because when Company A covers 100% of the repair costs, customers may be less careful since they don't bear the financial consequences of accidents, leading to more accidents.

Company a and Company B Are Two Car Insurance Companies