3-50 the Problem of Adverse Selection

question 56

Multiple Choice

3-50 The problem of adverse selection

• A)implies that many people who do not need insurance coverage have it through group plans.
• B)means that those people who apply for insurance are the least likely to need insurance coverage.
• C)causes insurance underwriters to alter the health statistics of the general population when determining appropriate premiums.
• D)creates a savings element along with the insurance component of the premium and policy.
• E)does not exist in the insurance industry.

---

Definitions:

Volatile Exchange Rates

Exchange rates that fluctuate widely in a short period of time, affecting the value of currencies traded on the foreign exchange market.

Accounting Standards

The rules and guidelines that companies must follow when reporting financial data.

Disclosure Standards

The requirements and guidelines set by regulatory bodies for the information that must be provided by publicly traded companies to protect investors and maintain transparency.

Financial Statements

Reports that provide an overview of a company's financial condition, including balance sheet, income statement, and cash flow statement.