When bad drivers line up to purchase collision insurance,automobile insurers are subject to the
A)moral hazard problem.
B)adverse selection problem.
C)assigned risk problem.
D)ill queue problem.

Question

Quizplus · Accepted Answer

The adverse selection problem occurs when those who are most likely to make a claim are the ones who purchase insurance. In this case, bad drivers are more likely to purchase collision insurance, leading to higher costs for automobile insurers. This can result in higher premiums for all customers. The moral hazard problem refers to the tendency for insured individuals to take more risks because they are protected by insurance. The assigned risk problem involves the requirement for insurance companies to provide coverage to high-risk individuals who cannot obtain insurance elsewhere. "Ill queue problem" is not a term commonly used in the insurance industry.

When Bad Drivers Line Up to Purchase Collision Insurance,automobile Insurers