Designing an Incentive-Based Insurance Feature
A company is developing a new insurance product for high-end bicycles in a city known for high theft rates. The company is concerned that if a bicycle is fully insured against theft, the owner might be less diligent about using high-quality locks or choosing secure parking spots. Propose a specific feature to include in this insurance policy that would encourage bicycle owners to take better precautions against theft. Justify your proposal by explaining how it creates a financial incentive for the owner to be more careful.
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Economics
Economy
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
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Creation in Bloom's Taxonomy
Cognitive Psychology
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Evaluating Insurance Plan Incentives
An auto insurance company raises the standard deductible on its collision policies from $250 to $1,000. Which of the following statements best analyzes the primary purpose of this change as an incentive mechanism?
The sole purpose of an insurance deductible is to reduce the total amount an insurer has to pay out for any single claim that is filed.
The Behavioral Impact of Health Insurance Co-payments
Designing an Incentive-Based Insurance Feature
Match each insurance policy feature with the primary behavioral incentive it is designed to create for the policyholder.
Analyzing Insurance Plan Outcomes
A company offers its employees two health insurance plans. Plan A has a high monthly premium but covers 100% of all medical costs. Plan B has a low monthly premium but requires the employee to pay the first $50 of any doctor's visit. Which statement best analyzes the behavioral incentive created by the structure of Plan B compared to Plan A?
By requiring a policyholder to pay a portion of a claim out-of-pocket, insurance features like deductibles and co-payments are designed to mitigate the problem of ______, where an individual's behavior becomes riskier after obtaining insurance.
A home insurance company introduces a mandatory $1,000 payment that a homeowner must make on any claim before the insurance coverage begins. Arrange the following statements to describe the logical sequence of how this feature is intended to influence a homeowner's behavior.