In addition to bearing risk,insurance companies also bear:
i.administrative costs; II)moral hazard costs; III)adverse selection costs

Question

Quizplus · Accepted Answer

Insurance companies bear administrative costs, which include expenses related to managing policies, processing claims, and marketing. They also incur moral hazard costs, which are costs associated with the increased risk-taking behavior of insured individuals. Finally, insurance companies face adverse selection costs, which arise when policyholders are more likely to file claims than the insurer initially anticipated. Therefore, all three options are correct.

In Addition to Bearing Risk,insurance Companies Also Bear