1. Do you consider it to be unethical for insurance companies to charge high-risk people a higher premium than low-risk people? 2. Are insurance companies

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1. Do you consider it to be unethical for insurance companies to charge high-risk people a higher premium than low-risk people?
2. Are insurance companies acting responsibly when they require customers to disclose medical information and/or submit to a medical examination?
3. How would you argue in favor of Judy Wasylycia-Leis’s proposed legislation?
4. How would you argue against Judy Wasylycia-Leis’s proposed legislation?

Adverse selection occurs when one party has an information advantage over the other party. In the case of insurance, people taking out insurance know more about their health and lifestyle than the insurance company. Therefore, in order to reduce information asymmetry, the insurance company asks prospective customers to complete a medical questionnaire and/or submit to a medical examination. Knowing the health risks associated with the people taking out insurance allows the insurance company to better adjust the premiums that it charges. For example, the premium for smokers is higher than for non-smokers.