Community Rating and Adverse Selection Are Somewhat Related Concepts in Insurance

question 9

Multiple Choice

Community rating and adverse selection are somewhat related concepts in insurance policy analysis.Which of the following are true regarding adverse selection:

• A)given equal insurance premiums across groups, the most costly households will tend to buy insurance, while the least costly households will not.
• B)adverse selection limits rate differences to selected categories, which does not allow insurance companies to charge each group according to its expected cost.
• C)only the sickest or most dangerous are likely to buy insurance.
• D)adverse selection refers to bad choices among some individuals.
• E)a and c are both correct.

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Definitions:

Negotiated ADR Systems

Negotiated ADR (Alternative Dispute Resolution) Systems refer to structured processes for resolving disputes outside the courtroom through mutual agreement, incorporating negotiation techniques.

ADR Systems

Alternative Dispute Resolution systems, which include various methods such as arbitration and mediation to resolve disputes outside of the judicial process.

Symmetric Prescriptive Advice

Recommendations that apply equally to all parties involved in a situation or conflict, advocating for similar actions or behaviors.

Bazerman

Max H. Bazerman is a professor known for his work in the field of negotiation, decision making, and ethics.