Exam 8 2018 Q4

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in GENERAL

Hello,

I do not understand how there would be no risk of adverse selection. If I, as a bad driver, know that I will get a discount by installing this device and based on the question there will be no repercussions for driving badly. What would discourage me from getting the device to get the discount?

Thanks,

Dan

Comments

  • adminadmin

    The question says everyone who uses the telematics program gets the 5% discount. However, we don't see anywhere that says poor driving behavior won't be surcharged either via a retrospective premium adjustment or higher premium for the next policy term.

    So risky drivers are discouraged by the thought of a quick upfront premium reduction being turned into (much) higher premiums in the future as the company learns about their poor braking practices etc.

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