Adverse selection arises because people at greater risk are more likely to buy insurance than those for

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Adverse selection arises because people at greater risk are more likely to buy insurance than those for whom a risk is very small. For example, a person with a family history of serious illness is more likely to buy health insurance than a person with a family history of good health. Similarly, an aggressive driver is more likely than a careful driver to take the fullest possible coverage. So more of the insured risks arise from the activities of the riskiest people.

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Foundations Of Microeconomics

ISBN: 9780134491981

8th Edition

Authors: Robin Bade, Michael Parkin

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