Asked by Lorie Jones on Sep 24, 2024
Verified
The reason some insurance customers are more eager to purchase insurance is
A) they are more risk averse
B) they are less risk averse
C) they have a greater risk of making a claim
D) Both A&C
Risk Averse
A description of an individual's or entity's preference to avoid risk, often by choosing options with certain outcomes over those with higher degrees of uncertainty.
Insurance
A form of risk management primarily used to hedge against the risk of a contingent or uncertain loss.
- Fathom the concept of risk aversion and its influence on behavior related to buying insurance.
- Clarify how adverse selection influences the operational dynamics of insurance markets.
Verified Answer
SM
Sabrina Mosby5 days ago
Final Answer :
D
Explanation :
Customers who are more risk averse are generally more eager to purchase insurance as they are willing to pay a premium to avoid financial losses. Additionally, customers who have a greater risk of making a claim (based on their lifestyle or profession) may also be more eager to purchase insurance. Therefore, option D, which includes both factors, is the best choice.
Learning Objectives
- Fathom the concept of risk aversion and its influence on behavior related to buying insurance.
- Clarify how adverse selection influences the operational dynamics of insurance markets.