The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following?
I.Decrease in moral hazard
II.More accurate prediction of future losses
A)I only
B)II only
C)both I and II
D)neither I nor II

Question

Quizplus · Accepted Answer

The requirement that losses should be accidental and unintentional reduces the likelihood of intentional damage, thus decreasing moral hazard. Additionally, since insurers can more accurately predict the likelihood and severity of accidental losses, they can set premiums that are more reflective of the risk. This results in a more accurate prediction of future losses. Therefore, both I and II are correct.

The Requirement That Losses Should Be Accidental and Unintentional in Order