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When Susie takes up smoking, the cost of her insurance coverage goes up. This is a result of:
A) Risk Insurance
B) Risk Adjustment
C) Clerical Error
D) Risk Adversity
The Correct Answer for the given question is option B) Risk Adjustment
When Susie takes up smoking, the cost of her insurance coverage goes up. This is a result of Risk Adjustment. In the insurance industry, risk adjustment is the process of transferring funds from plans with lower-risk enrollees to plans with higher-risk enrollees.
Smokers are generally considered to be high-risk because they are more likely to develop health problems like lung cancer, heart disease, and stroke. As a result, Susie’s insurance company will have to pay out more money in claims if she smokes. To offset this increased risk, the company will charge her a higher premium.
Risk adjustment is a process used by insurance companies to account for different levels of risk among policyholders. When Susie takes up smoking, her insurance coverage becomes more expensive because she is now considered a higher-risk customer. This is because smokers are more likely to develop health problems such as lung cancer, which can be costly to treat. While risk adjustment may seem unfair to smokers like Susie, it helps to ensure that insurance companies are able to cover the medical costs of all of their customers, both high- and low-risk.
In Susie’s case, her smoking habit means that she is more likely to develop health problems in the future, and so her insurer charges her more for coverage. Smoking is a well-known risk factor for many health problems. It’s also a habit that can be quite costly, not just to your health, but also to your wallet. If you’re a smoker, you may notice that your insurance premiums are higher than those of nonsmokers. This is because insurers account for the increased risk of smoking-related illnesses when they set premiums.