If you have private information that you are a riskier driver than your record indicates,you are likely to buy an insurance policy that has a ________ deductible and a ________ premium.
A) high; high
B) high; low
C) low; high
D) low; low
E) None of the above answers are correct because private information has no effect in the market for auto insurance.

Question

Quizplus · Accepted Answer

If someone knows they are a riskier driver, they may choose a lower deductible policy to ensure they will have to pay less out-of-pocket in case of an accident. However, since they are a riskier driver, the insurance company will likely charge them a higher premium to compensate for the increased likelihood of an accident. Therefore, a low deductible and high premium policy would make sense for someone with private information indicating they are a riskier driver.

If You Have Private Information That You Are a Riskier