When Do Insurance Companies Encounter the Problem of Moral Hazard

Multiple Choice

When do insurance companies encounter the problem of moral hazard?

A) When simply having insurance causes people to take more risks than they would otherwise.
B) When they do not have enough information to distinguish between people who are "good risks" and those who are "bad risks."
C) When the price of insurance premiums fully reflects all available information.
D) When the insurance company suffers large losses because a major catastrophe has affected a large number of people simultaneously.