Final answer:
A signed application for automobile insurance must be obtained before a policy is issued as per Provincial Insurance Acts. Car insurance is often legally required and its rates are influenced by various factors, including the driver's age and driving history. Government mandates for insurance help address adverse selection by spreading risk across all insured individuals.
Step-by-step explanation:
Provincial Insurance Acts require that a signed application for automobile insurance must be obtained before a policy can be issued. This is to ensure that the insurance company has all the necessary information and consent from the individual seeking insurance. Automobile insurance is critical for protecting drivers from large out-of-pocket expenses in the event of an accident. It's usually mandated by law, and prices can be influenced by factors such as the vehicle's safety rating, driving history, and the driver's age. Insurance rates can typically be paid on different schedules, but it remains an ongoing expense.
It's challenging for insurance companies to collect data on how people actually drive, which brings about the issue of information asymmetry. Governments often intervene by requiring all car owners to have insurance, which helps mitigate the problem of adverse selection. This compels lower risk individuals to subsidize the higher risk ones to a certain extent.