An Example of an Adverse Selection Problem Is in Insurance

question 52

True/False

An example of an adverse selection problem is in insurance, where the people most likely to claim
insurance payouts are the people who will seek to buy the most generous policies.

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Definitions:

Psychoanalysis

Freud’s theory of personality that attributes thoughts and actions to unconscious motives and conflicts; the techniques used in treating psychological disorders by seeking to expose and interpret unconscious tensions.

Free Association

In psychoanalysis, a method of exploring the unconscious in which the person relaxes and says whatever comes to mind, no matter how trivial or embarrassing.

Self-Actualization

The process by which individuals realize their fullest potential, achieving their personal, creative, and intellectual capabilities and aspirations.

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