What Is Adverse Selection?
The tendency of individuals with higher health risk or anticipated need for services to purchase insurance more readily than those in good health, which insurers manage through underwriting, rate adjustment, or plan design.
Adverse Selection across 2 exams
Adverse Selection appears on the following exams. Each defines it in the context candidates are tested on:
- Health Insurance
- The tendency of individuals with higher health risk or anticipated need for services to purchase insurance more readily than those in good health, which insurers manage through underwriting, rate adjustment, or plan design.
- Series 57
- A market microstructure issue where informed traders may selectively trade against market makers, creating asymmetric information costs. Market makers widen bid-ask spreads to compensate for this potential loss.