Auto insurer tracks driving habits via smartphone AAA insurance wants customers to install a smartphone app that lets the company track driving habits. How might smartphone monitoring of driving habits influence adverse selection and moral​ hazard?
Part 1 Smartphone monitoring of driving habits​ _______ adverse selection because​ _______.
A. has no​ effect; people will continue to drive as they have always driven
B. ​reduces; when careless drivers are approved for​ insurance, they will drive in an aggressive manner even if they have the smartphone app
C. ​creates; only​ young, inexperienced drivers will enjoy having a smartphone app
D. ​reduces; careless drivers cannot receive the benefit of private information about their bad driving
E. ​creates; it eliminates a separating equilibrium
Part 2 Smartphone monitoring of driving habits​ _______ moral hazard because​ _______.
A. ​reduces; careless drivers cannot receive the benefit of the private information about their bad driving
B. ​reduces; a driver who knows he is being monitored becomes less careless
C. ​creates; once a driver is insured he drives more carelessly
D. ​creates; it creates a separating equilibriumE. ​reduces; there is no longer a need for the​