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Social Science Clinic => Economics => Microeconomics => Topic started by: lrhoads on Oct 12, 2022

Title: Why does moral hazard often arise in the case of insurance? Because
Post by: lrhoads on Oct 12, 2022

Why does moral hazard often arise in the case of insurance? Because
◦ people generally underestimate the amount of insurance coverage needed.
◦ insurance companies have no incentive to investigate fraudulent claims.
◦ insured people will not take sufficient care to reduce risks because the private cost of reducing risks exceeds the private benefit of reducing risks.
◦ insured people will not take sufficient care to reduce risks because the private benefit of reducing risks exceeds the private cost of reducing risks.
◦ people who are in the most need of insurance have the most trouble obtaining insurance coverage.

Title: Why does moral hazard often arise in the case of insurance? Because
Post by: kalimarie on Oct 12, 2022

insured people will not take sufficient care to reduce risks because the private cost of reducing risks exceeds the private benefit of reducing risks.