Final answer:
In Oregon, the legality of inducements to purchase insurance would be governed by state insurance laws. Mandated insurance purchases help avoid adverse selection, allowing companies to set average market prices. Insurance companies balance the need to provide coverage with managing risk exposure and avoiding moral hazard.
Step-by-step explanation:
The legality of inducements to purchase insurance involves understanding how insurance markets function with government regulations. In states like Oregon, the nature of such inducements would be subject to the state's insurance laws and regulations. Government interventions in insurance markets often require individuals to purchase insurance to prevent adverse selection, where insurers could potentially lose out if only high-risk individuals buy insurance. Mandated purchases, like auto insurance or homeowner's insurance, help create a balanced risk pool. However, even with those mandates, insurers may still attempt to avoid insuring high-risk individuals unless required by law.
Insurance companies set prices based on an average for the market due to the legal requirement that reduces the fear of adverse selection. This leads to a situation where those with lower risk profiles subsidize individuals with a higher risk. Despite this, insurance companies are not legally obligated to offer coverage to everyone at the same rate, ostensibly to manage their risk exposure.
The concept of moral hazard is also relevant in this context, where individuals who are insured may take fewer precautions against risks because they know they have coverage. The balance between ensuring broad coverage and avoiding moral hazards is a delicate one for insurance companies and is managed through actuarially fair policies and the setting of premiums based on an average risk level.