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Question 128

An applicant intentionally lying to an insurance company on an application in order to obtain a lower premium is an example of:

A. fraud
B. rebating
C. twisting
D. coercion


Sagot :

Final answer:

An applicant lying on an insurance application for lower premiums is considered fraud. Financial institutions use verification methods to prevent fraudulent activities and reduce adverse selection.


Explanation:

Fraud is the appropriate term for an applicant intentionally lying to an insurance company on an application to obtain a lower premium. This action constitutes deceit and misrepresentation for financial gain.

Financial intermediaries use various methods like verifying information with third parties to prevent such fraudulent activities. They aim to protect their profits and policyholders from individuals attempting to deceive the system.

Reducing adverse selection is crucial for financial facilitators, who utilize screening processes to distinguish between good and bad risks when providing loans or insurance policies, thereby combating fraud.


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