Comparing Insurable Risks

Viability of Private Unemployment Insurance

A private insurance company is exploring the possibility of offering a new policy that would pay a monthly stipend to clients who become involuntarily unemployed. An internal analyst argues that this product is likely to be unprofitable and should not be launched. Which of the following scenarios best illustrates the core economic problem the analyst is likely concerned about?

The absence of a widespread private market for unemployment insurance is primarily due to the difficulty private insurers face in calculating the statistical probability of large-scale economic downturns, a problem known as catastrophic risk.

The absence of a widespread private market for unemployment insurance is primarily due to the difficulty private insurers face in calculating the statistical probability of large-scale economic downturns, a problem known as catastrophic risk.

Critique of a Privatized Unemployment Insurance Proposal

The Challenge of Private Unemployment Insurance

A government is establishing a public unemployment benefits program because private insurance companies are unwilling to offer such policies. The primary concern for private insurers is that once individuals are insured against job loss, they may not search for a new job as diligently. Which of the following program rules would most directly address this specific concern?

An insurance company is analyzing the risks of offering private unemployment coverage. Match each type of problem the insurer might face with the specific scenario that best illustrates it.

Mitigating Behavioral Risks in Unemployment Insurance