An insurance management tool to reduce moral hazard is to ________.
A)charge the same premium for different risks
B)limit the amount of insurance provided
C)reduce the deductible to zero
D)prohibit coinsurance

Question

Quizplus · Accepted Answer

Limiting the amount of insurance provided can reduce moral hazard by reducing the incentive for insured individuals to take risks or engage in behaviors that increase the likelihood of a claim. By capping the amount of coverage, individuals have a greater financial stake in avoiding losses and may act more responsibly as a result. The other options listed do not directly address moral hazard or may even exacerbate the problem. Charging the same premium for different risks can encourage higher-risk individuals to purchase insurance, while reducing the deductible to zero or prohibiting coinsurance lowers the out-of-pocket costs for insured individuals, which can increase the likelihood of filing a claim.

An Insurance Management Tool to Reduce Moral Hazard Is to ________