The Problem of Adverse Selection in Insurance Results in a Situation

question 108

Multiple Choice

The problem of adverse selection in insurance results in a situation in which:

• A) people choose inappropriate or inadequate coverage because they do not understand the complex information in the policies.
• B) people choose too much coverage because they do not understand the complex information in the policies.
• C) people choose too little coverage because they do not understand the complex information in the policies.
• D) unhealthy people become more likely to buy insurance than healthy people, which drives premiums up, which drives even more healthy people away from the market.
• E) healthy people become more likely to buy insurance than unhealthy people, which drives premiums up, which drives even more unhealthy people away from the market even though they are the ones who need it most.

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Definitions:

Work Weekends

The practice of engaging in professional or job-related activities during the weekend days, which are traditionally considered part of the rest period.

Pay Raise

An increase in the amount of money an employee receives for their work.

Chief Financial Officer

is a senior executive responsible for managing the financial actions of a company, including financial planning, risk management, and financial reporting.

Information Power

The ability to influence others based on the possession, control, or access to data and information that is perceived as valuable.