(Solved):Is it necessary that adverse selection and moral hazard coexist in insurance market? View Answer…

 

Question

Is it necessary that adverse selection and moral hazard coexist in insurance market?

 

EXPERT ANSWER

It is not necessary that adverse selection and moral hazard coexist in the insurance market, because they occur in different times. Adverse selection refers to the scenario where insurance companies attract the less desirable type of customers. This occurs before insurance policies are sold, and happens because customers seeking insurance have more information about the relevant risks

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