An unhealthy person would likely choose a medical insurance policy with a a. low premium and a high deductible. b. high premium and no deductible. c. high premium and a high deductible. d. The unhealthy person would choose not to be insured. QUESTION 5 A safe driver would likely choose an auto insurance policy with a a. low premium and a high deductible. b. high premium and a high deductible. c. high premium and no deductible. d. high premium and a low deductible. QUESTION 6 A home has been on the market for an extended amount of time without much interest from buyers. The sellers decide to purchase and include a home warranty insuring against major defects with the home. The warranty is an example of a(n) a. signal. b. moral hazard. c. screen. d. adverse selection. QUESTION 7 Life insurance companies usually require applicants to have physicals and disclose information on their health. This practice is designed to address a. a problem involving hidden characteristics. b. a principal-agent problem. c. a moral-hazard problem. d. all of the above are correct.
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An insurance company offers four different deductible levelsānone, low, medium, and highāfor its homeowners' policyholders and three different levelsālow, medium, and highāfor its automobile policyholders. The accompanying table gives proportions for the various categories of policyholders who have both types of insurance. For example, the proportion of individuals with both a low homeowners' deductible and a low auto deductible is 0.05 (5% of all such individuals). Homeowner's Auto N L M H L 0.04 0.05 0.05 0.04 M 0.07 0.12 0.20 0.08 H 0.02 0.03 0.15 0.15 Suppose an individual having both types of policies is randomly selected. (a) What is the probability that the individual has a medium auto deductible and a high homeowners' deductible? (b) What is the probability that the individual has a low auto deductible? A low homeowners' deductible? (c) What is the probability that the individual is in the same category for both auto and homeowners' deductibles? (d) Based on your answer in part (c), what is the probability that the two categories are different? (e) What is the probability that the individual has at least one low deductible level? (f) Using the answer in part (e), what is the probability that neither deductible level is low?
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An insurance company offers four different deductible levels $-$ none, low, medium, and high-for its homeowner's policyholders and three different levels-low, medium, and high-for its automobile policyholders. The accompanying table gives proportions for the various categories of policyholders who have both types of insurance. For example, the proportion of individuals with both low homeowner's deductible and low auto deductible is .06$(6 \%$ of all such individuals). Suppose an individual having both types of policies is randomly selected. (a) What is the probability that the individual has a medium auto deductible and a high homeowner's deductible? (b) What is the probability that the individual has a low auto deductible? A low homeowner's deductible? (c) What is the probability that the individual is in the same category for both auto and homeowner's deductibles? (d) Based on your answer in part (c), what is the probability that the two categories are different? (e) What is the probability that the individual has at least one low deductible level? (f) Using the answer in part (e), what is the probability that neither deductible level is low?
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