Why would a market for grade insurance not work? a. Most students don’t need it

Question

Why would a market for grade insurance not work?

a. Most students don’t need it since they like to study hard.

b. Only three companies in the world provide grade insurance.

c. The premium for such insurance might be too high for low income students

to afford.

d. Students will have an incentive to get low grades, or not exert as much effort,

and collect payments from the insurance company. The grade insurance

company may go bankrupt by paying out more disbursements than the

premiums they collect.

Explanation / Answer

D is the answer

Giving incentive for failure is probably the worst thing any one can do , This is the reason grade insurance wont work. However there are 1000's of insurance product that cover risk, but clearly those risks are insured only because the insurance companies to a degree know that there is no incentive for you to wanted cause damage.

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