Final answer:
Insurance companies may refuse to insure certain operators to minimize risk and avoid adverse selection. They use strategies like separating buyers into risk groups and monitoring behavior to reduce the impact of moral hazard.
Step-by-step explanation:
Insurance companies may refuse to insure certain operators in order to minimize risk. This is often done to avoid adverse selection, which occurs when insurance is more likely to be purchased by those who are at a higher risk of making a claim. Insurance companies try to separate insurance buyers into risk groups and charge them accordingly. They may also use other strategies, such as monitoring behavior and offering incentives to minimize risk.