Which of the following is a result of adverse selection?
A)The insurer's financial results will be substantially improved.
B)Persons most likely to have losses are also most likely to seek insurance at standard rates.
C)It is unnecessary for the insurance company to use underwriting.
D)Insurance can be written only by the federal government.

Question

Quizplus · Accepted Answer

Adverse selection occurs when those who are most likely to have losses are also most likely to seek insurance at standard rates. This can result in higher claims costs for the insurer, which can lead to increased premiums for all policyholders.

Which of the Following Is a Result of Adverse Selection