Which of the following can be avoided by using experience ratings? (Cost Advantage)

Question

Quizplus · Accepted Answer

Experience ratings allow insurance companies to adjust premiums based on the individual group's claims history. This helps to avoid adverse selection, where high-risk individuals are more likely to enroll in insurance plans, leading to higher claims and costs for the insurance company. Therefore, by avoiding adverse selection, experience ratings can provide a cost advantage for insurance companies. Medical underwriting, economies of sales, and insurance pooling are not directly related to experience ratings and cost advantage.

Which of the Following Can Be Avoided by Using Experience