In insurance markets, adverse selection often

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Adverse selection occurs when the people who are most likely to make a claim are also the ones who are most likely to buy insurance, while those who are less likely to make a claim are less likely to buy insurance. This results in insurance companies facing greater risk and costs than they anticipated, which leads to higher premiums or a reduction in coverage options. The end result is often the elimination of exchange possibilities that would be beneficial to both consumers and insurance companies alike.

In Insurance Markets, Adverse Selection Often