Insurance companies deal with the problems of moral hazard by:
A)always insuring buildings for their full replacement value.
B)refusing to insure commercial properties against losses caused by fire.
C)requiring a deductible to provide an incentive for insured individuals to take reasonable precautions to avoid losses.
D)charging extra in cases of adverse selection.

Question

Quizplus · Accepted Answer

Requiring a deductible gives the insured individual an incentive to take reasonable precautions to avoid losses, thus reducing the risk of moral hazard.

Insurance Companies Deal with the Problems of Moral Hazard By