An Insurance Company Can Prevent the Adverse Selection Death Spiral

question 62

Multiple Choice

An insurance company can prevent the adverse selection death spiral by selling to groups of people such as groups of employees in a workplace. This will allow the insurance company to:

• A) increase the chances that both healthy and unhealthy people will sign up for coverage.
• B) increase the chances that only healthy people will sign up for coverage.
• C) force both healthy and unhealthy people to sign up for coverage.
• D) charge higher prices because the employer will pay the premiums.

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Definitions:

Bank Statement Balance

The ending account balance in a bank statement, representing the amount of money available in an account at the end of a statement period.

Outstanding Checks

Checks that have been written and recorded in the payer's financial records but have not yet been cashed or cleared by the bank.

Deposits In Transit

Funds that have been received and recorded by a company, but not yet recorded by its bank, typically at the end of a financial period.

Bank Service Charge

A bank service charge is a fee imposed by a bank on its customers for the provision of banking services such as account maintenance, transactions, and overdrafts.