Charge potential frequent abusers higher fee structure

Assignment Help Operation Management

Reference no: EM132193544

Having known that information asymmetry is compounded by adverse selection and moral hazard, as an insurance analyst for a car insurance company, you need to set up a premium\deductible structure that will help identify the type of customers that are likely to make frequent claims. Speak directly to your employees and explain how you would set up the two-tier pricing model.

a. Indicate to your employees how you would set up this structure with a specific example.

b. Would it be ethical to charge potential “frequent abusers” a higher fee structure? Please justify your reasoning based on ethical perspectives.

c. Explain to your employees the process you would follow and how this would affect the financial bottom line of the company.

Reference no: EM132193544

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