Answer true or false and explain why.

Moral hazard predicts that, in the presence of homogeneous information, the removal of a rule forcing healthy (low risk) individuals into risk pools will generally result in a decrease in the premiums charged by insurers to individuals who remain in these risk pools.

TRUE

The above statement is true. The premium of insurance is charges based on the liability of risk that is to be covered by the insurance company. If an individual is aware that he falls under the low risk of an accident he will be able to choose a policy accordingly. This will result in individuals taking more low-risk insurance policies at a low premium. The premiums at high risk will decrease eventually to attract more customers.