When a business owner pays a salesperson a set salary, that salesperson may have an incentive to put forth less effort, take longer breaks, and generally have less motivation to increase their sales numbers than if their compensation was tied to their sales numbers. Who is responsible for assembling the policy forms for insureds? This economic concept is known as moral hazard. This economic crisis contains multiple examples of moral hazard. The Dodd-Frank Act of 2010 attempted to mitigate the likelihood of another moral hazard situation involving these "too-big-to-fail" corporations. It arises when both the parties have incomplete information about each other. Moral hazards exist when: The Balance uses cookies to provide you with a great user experience. Installing deadbolt locks on the doors of a home is an example of which method of handling risk? In the late 2000s, many giant U.S. corporations were on the verge of collapse as a result of years of risky investing, accounting blunders, and inefficient operations. There is some question about whether the government will have the will to exercise this power when a giant bank is in trouble -- what contractual conditions that produce moral hazard: There are many diverse examples of less likely to park so close to other cars that the door gets nicked, less All of the following are examples of risk retention EXCEPT A) Self-insurance B) Premiums C) Deductibles D) Copayments. Loss is the unintentional decrease in the value of an asset due to a peril.. Homogeneous exposure units are similar objects of insurance that are exposed to the same group of perils. November 22, 2013 / 8:00 AM face consequences if they make bad investments. However, the salesperson knows the consequences of this decision (potentially lower revenues) will be shouldered by the management of the company or the business owner, while their individual compensation will not be impacted. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company, The causes of loss insured against in an insurance policy are known as, The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as. This gives them the incentive to take more risks when they health risks. This person presents what type of hazard, When an individual purchases insurance, what risk management technique is he or she practicing, For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become, The trust that a client places in the producer in regard to handling premiums, Which of the following is an example of a producer's fiduciary duty, What documentation grants express authority to an agent, An insurance company receives an application with some information missing and issues the policy anyway. What is this called, The authority granted to an agent through the agent's contract is referred to as, Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization, Which statement regarding insurable risks is NOT correct, The agent accepts a premium payment after the end of the grace period, Which of the following is an example of apparent authority of an agent appointed by an insurer, The insured will need a written consent of the insurer, An insured wants to transfer his person insurance policy to a friend. Installing deadbolt locks on the doors of a home is an example of which method of handling risk, Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting, Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company, When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer, Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract, The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called, An insurance company sells an insurance policy over the phone in response to a TV ad. insurance against serious head injury and might induce a cyclist to take more
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