The insurance industry is susceptible to moral hazard problems, but not problems of adverse selection.

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Santosh Bhoir · Accepted Answer

Final Answer : False, Explanation :  Both moral hazard and adverse selection are significant issues in the insurance industry. Adverse selection occurs when there is asymmetric information before the transaction, leading to higher-risk individuals being more likely to purchase insurance. Moral hazard happens when the behavior of the insured party changes in a way that raises risks after the policy is purchased, due to the security the insurance provides.

The insurance industry is susceptible to moral hazard problems, but not problems of adverse selection.

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