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:

High Self-esteem

A positive and confident evaluation of oneself and one's abilities.

Self-evaluation

The process of examining one's own performance or qualities, often to identify areas for improvement.

Behavioural Plasticity

The capacity of an individual to change or adapt their behavior in response to changing environmental conditions or experiences.

External Influences

refers to factors outside an organization that can affect its operations and success, such as economic conditions, regulation, and competition.