Question

The movie portrays a very sinister picture of Great Benefit Insurance Company. Was the ultimate outcome of the case satisfying to you or dissatisfying? Had this been a real case, what would have been the real-life implications? What would it have meant for future business practices?

A) Satisfying; Real-life implications would include increased regulation and scrutiny of insurance companies; Improved business ethics.
B) Dissatisfying; Real-life implications would involve no change in insurance practices; Business as usual.
C) Satisfying; Real-life implications would have led to legal actions against the company; Stricter industry standards.
D) Dissatisfying; Real-life implications would have resulted in the company going out of business; Improved customer trust.

Answer 1

The court case with the insurance company portrayed in the movie, if real, would likely have led to legal action and stricter industry standards (option C), along with increased regulation and greater emphasis on proper business ethics.

Step-by-step explanation:

Based on the scenario presented where an insurance company must navigate adverse selection and market forces, the film's portrayal of the court case suggests that if it were a real scenario, the ultimate outcome would probably be most similar to option C: satisfying; where real-life implications would have led to legal actions against the company; resulting in stricter industry standards. Such actions would likely result in a company facing significant financial repercussions and increased scrutiny by regulators, leading to a wider impact on the insurance industry with heightened regulation to prevent similar situations in the future. Additionally, it may encourage better business ethics and practices across the industry to protect consumer interests and maintain trust.

In a real-world context, adverse selection challenges the viability of insurance markets. Insurance companies may attempt to segregate buyers into risk groups to mitigate risks; however, this may lead to those with lower risks being disincentivized to purchase insurance. To counterbalance this, laws and regulations may be invoked to ensure equitable access and responsibility, as seen in the trade-off described, where public regulation is accepted for guaranteed financing. These regulations, when effectively enforced, can compel businesses to adopt fair and transparent practices, benefiting consumers and possibly enhancing trust in the insurance sector.

Incidents like the Firestone/Ford tire controversy underscore the importance of ethical business practices and regulatory oversight in sustaining long-term corporate profitability and customer trust. Regulatory measures, including the ability for employees to lodge confidential complaints against their employer, are essential for the safe operation of businesses and protection of public interest.