A dental insurance company charges premiums higher than average dental costs across a population and loses money. When it keeps raising the premiums on its policies, its losses keep rising. The dental insurance company is facing

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The situation described is an example of an adverse selection death spiral. This occurs when individuals with a higher risk of needing dental care are more likely to purchase insurance, driving up costs for the insurance company. As the insurance company raises premiums to cover these costs, the only individuals who continue to purchase coverage are those with a higher risk of needing dental care, leading to even higher costs and more premium hikes. This creates a cycle where the insurance company is constantly losing money and struggling to keep up with rising costs.

A Dental Insurance Company Charges Premiums Higher Than Average Dental