1. *2.2 In July 2016, China implemented its first earthquake insurance policy. It allows homeowners to buy insur ance from private Chinese insurers to cover loss and damage to residential property caused by earthquakes of magnitude of 4.7 Richter or over. The maximum payout is 1 million yuan. Premium rates vary with the location and construction of a property, and the prob ability of an earthquake. What would be the implica tions if an insurance company ignored any important factor in setting the premium it charges? For example, in the case of earthquake insurance, suppose the omit ted factor is the relative stability of the soil under a house. Is such an omission a moral hazard?