Question

In its earliest North American form, the first fire insurance company insured against fires and ________.

1) earthquakes
2) floods
3) theft
4) accidents

Answer 1

The earliest North American fire insurance company insured against fires and theft. Such companies formed to offer financial protection against unexpected losses, with various measures like minimum security and fire sprinkler systems introduced to reduce moral hazard.

Step-by-step explanation:

The earliest North American fire insurance company was established to insure against fires and theft. This stems from the need to protect financial assets and property from undesired outcomes. As insurance markets developed, companies offered various types of insurance to mitigate the economic risks that individuals face, including health insurance, car insurance, house or renter's insurance, and life insurance. Establishing minimum levels of security and fire sprinkler systems are among the measures businesses can adopt for reduced insurance rates. These systems help in mitigating moral hazard, which is the risk of individuals being less diligent about preventing losses they are insured against.