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pinkypie123457
pinkypie123457
05.05.2020 • 
Business

An insurance company is considering issuing three types of fire insurance policies: (i) complete insurance coverage, (ii) complete coverage above and beyond a $10,000 deductible, and (iii) 90 percent coverage of all losses. Which policy is more likely to create moral hazard problems? A. Complete insurance coverage because it provides the least incentive for homeowners to take actions to reduce the probability of a loss. B. Complete coverage above and beyond a $10,000 deductible because the deductible increases the likelihood that a homeowner will commit insurance fraud. C. 90 percent coverage of all losses because it gives homeowners an incentive to overvalue their property in order to profit from a loss. D. None of the policies create a moral hazard problem as long as the coverage is less than the value of the property covered.

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