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Question 7 (Max 150 words, 3 marks] Consider Gi-hun who is a graduate underwriter in a major insurance firm. Recently, he has been hearing increasingly
Question 7 (Max 150 words, 3 marks] Consider Gi-hun who is a graduate underwriter in a major insurance firm. Recently, he has been hearing increasingly often about rival insurance firms automating their underwriting process. He has also heard a rumour that the management of his firm is looking to reduce the size of his underwriting team and create a large team of data scientists with expertise in artificial intelligence, who will develop the automated underwriting process. Discuss how this recent information about the insurance industry and Gi-hun's firm would affect his incentive to supply effort at work. Question 8 [Max 150 words, 3 marks] a It turned out that the rumour was true. Soon, the management of Gi-hun's firm announced its restructuring decision. In addition, the firm also announced that it is to acquire a few smaller insurance firms in near future. Discuss the effect of these decisions (expected by the management) on its production cost and market power. Your discussion must refer to economies of scale elasticity of demand
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