Adverse selection results in which of the following?
A) No underwriting is necessary.
B) Applicants for insurance have a higher probability of loss than the average group of insureds.
C) The federal government must write the insurance.
D) Better insureds are attracted to the group.

Question

Quizplus · Accepted Answer

Adverse selection occurs when applicants for insurance have a higher probability of loss than the average group of insureds. This can result in higher claims costs for the insurer, which may lead to higher premiums for all insureds. Underwriting is still necessary to assess the risk level of individual applicants and adjust premiums accordingly. The federal government is not necessarily involved, and better insureds may not be attracted to the group if adverse selection is present.

Adverse Selection Results in Which of the Following