Coverall, Inc., an insurance company, recently moved into the motorcycle insurance market. Coverall was concerned that the most likely motorcycle insurance customers are those who ride their motorcycles recklessly, because they would benefit most from insurance coverage. Since Coverall cannot distinguish perfectly between high-risk and low-risk cyclists, it raised its motorcycle premiums in an effort to account for the reckless riders. The economic problem in this story is known as:a. signalingb. screeningc. adverse selectiond. moral hazard

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Business

Kaylyn Goodwin

20 March, 20:49

Coverall, Inc., an insurance company, recently moved into the motorcycle insurance market. Coverall was concerned that the most likely motorcycle insurance customers are those who ride their motorcycles recklessly, because they would benefit most from insurance coverage. Since Coverall cannot distinguish perfectly between high-risk and low-risk cyclists, it raised its motorcycle premiums in an effort to account for the reckless riders. The economic problem in this story is known as:a. signalingb. screeningc. adverse selectiond. moral hazard

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Jenkins · Answer 1

It is a result of adverse selection

Explanation:

The economic problem in this story is adverse selection. As in this the person who take the insurance drive uselessly and carelessly. In Coverall, Inc., an insurance company's case insurance company increases premium amount in order to cover this type of customer. It is a result of adverse selection.