How significant do you believe thesephenomena are in people’s behavior? For inst

Question

How significant do you believe thesephenomena are in people’s behavior? For instance, wouldyour driving habits change if you didn’t have autoinsurance? Would you take better care of yourself if youdidn’t have health insurance? Are people who work for acompany with a generous disability plan more likely to claimthey’re disabled than people who do not have disabilityinsurance? Can you think of any other examples where adverseselection or moral hazard could exist? Explain how…and the potential consequences.

Explanation / Answer

Adverse selection or Moral hazarddependes on the individual's value system.And it is different formone insured to another insured.

actually insurance is intendedfor reducing the loss in case the peril occurs but now a daysit is the other way round.Some individual are buying insurance formaking money but not to reduce the loss.

So in all the above mentioned casesthere is a chance of moral hazard.But still it depends on theindividual who has taken the insurance.

For instance, wouldyour driving habits change if you didn’t have autoinsurance?

Yes this is for sure the drivinghabits will change since you know that you dont have the insuranceand you have to bear all the loss in case of anyaccident.

Would you takebetter care of yourself if you didn’t have healthinsurance?

Yes this is for sure the personswithout health insurance tend to take care of their health more,since you know you have to bear all the medicalexpenses.

Are people whowork for a company with a generous disability plan more likely toclaim they’re disabled than people who do not have disabilityinsurance?

yes, if you have anydisability insurance more likely to claim because if the claim isaccepted then he will get the money without working.

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