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Costs and Benefits of Insurance Systems

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Questions and Answers

What are the two main costs to society of operating an insurance system?

Cost of the resources utilized and increased losses due to attitudinal hazards

Cost of labor and capital investment, and increased losses due to attitudinal hazards

Cost of the resources utilized by the system and costs arising from increased losses due to attitudinal and moral hazards (correct)

Cost of the resources utilized and increased losses due to moral hazards

Which of the following is NOT a cost associated with operating an insurance system?

Cost of labor

Increased losses due to attitudinal hazards

Reduced crime rates (correct)

Cost of capital investment

Why can insurance sometimes lead to increased losses according to the text?

Insurance introduces more legal complexities

Insurance encourages risk-taking behavior (correct)

People feel more secure knowing they are insured

Insurance systems are not efficient

What is an example given in the text to illustrate the impact of insurance on criminal behavior?

Arson cases would decrease without insurance proceeds Signup and view all the answers

How do attitudinal hazards contribute to the costs of operating an insurance system?

By encouraging riskier behaviors Signup and view all the answers

Within how many calendar days must an insurer respond to a claim in writing?

40 Signup and view all the answers

What is the exception to the 40-day claim response requirement?

Disability or disability income policies Signup and view all the answers

What must an insurer provide to the claimant if the claim is denied?

A written notice of the claim denial, the claimant's right to review, and the insurer's contact information Signup and view all the answers

What is the purpose of the written notice every 30 calendar days?

To notify the claimant that the insurer needs more time to respond to the claim Signup and view all the answers

When must an insurer provide written notice with an explanation to the claimant?

When the insurer needs more than 40 days to respond to the claim Signup and view all the answers