If a life insurance company offers coverage regardless of age, health status, or smoking history, it is likely to suffer
A) moral hazard problems.
B) adverse selection problems.
C) lower costs.
D) low demand for its product.

Question

Quizplus · Accepted Answer

Adverse selection problems occur when an insurer cannot differentiate between high-risk and low-risk individuals, leading to a disproportionate number of high-risk individuals purchasing insurance, which can increase costs for the insurer.

If a Life Insurance Company Offers Coverage Regardless of Age