To avoid the problem of adverse selection, insurance companies screen their prospective customers to discover hidden health problems.

Question

Quizplus · Accepted Answer

This is true. Insurance companies screen their prospective customers to determine their risk level and discover any pre-existing conditions that could affect their health or potential insurance claims. This helps them to avoid adverse selection, where only high-risk individuals with pre-existing conditions purchase insurance.

To Avoid the Problem of Adverse Selection, Insurance Companies Screen