One way insurance companies deal with the problem of adverse selection is by:

Question

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Screening applicants is a way for insurance companies to identify and exclude individuals who pose a higher risk of making a claim, which helps to mitigate adverse selection. By filtering out those who are more likely to need insurance, insurers can offer lower premiums to low-risk individuals and maintain a balanced risk pool. Charging the same price to everyone (A) would not be effective since it does not differentiate between high and low-risk individuals. Monitoring policyholders (C) after they have purchased insurance could help detect fraud but would not address adverse selection. Similarly, spreading the risk in the same geographic area (D) does not address the problem of adverse selection.

One Way Insurance Companies Deal with the Problem of Adverse