A very controversial issue in many states currently is whether or not insurance companies should be allowed to use a person's credit history as a tool in determining the individual's automobile and homeowner insurance premium. Without getting into the legal or ethical issues, what do you think the insurance companies' motives might be for wanting to use the credit report?
What will be an ideal response?
This could be an information issue. It is very difficult and expensive for an insurance company to monitor a policyholder's behavior after the fact, so it may be that the insurance company is looking for a proxy (a stand in) for moral hazard, and it may be that a person's credit history has been found to be an indicator as to whether or not the individual may become a moral hazard.
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Which of the following statements is FALSE?
A) Transactions in which households buy final goods and services occur in the factor market. B) Saving is the difference between consumer income and expenditures. C) The value of total output is identical to total income. D) One definition of total income is that it is the annual cost of producing the entire output of final goods and services.
United Parcel Service and other parcel post carriers have expanded in part because
a. the U.S. Postal Service licensed them the right to deliver first-class mail b. Congress gave patents to these companies c. the U.S. Postal Service does not have a monopoly on all types of mail d. the telephone has replaced the letter as a means of correspondence e. Congress has all but eliminated funding for the U.S. Postal Service