The same underlying problem of non-observable actions also affects other contexts besides the insurance industry. It also arises in banking and finance: if a financial institution knows it is protected by a lender of last resort, it may make riskier investments than it would in the absence of the protection.
The same underlying problem of non-observable actions also affects other contexts besides the insurance industry It also arises in banking and finance if a financial institution knows it is protected by a lender of last resort it may make riskier investments than it would in the absence of the protection