Two consumers apply for life insurance with the same insurance company. George is a police officer who skydives in his spare time. Keira is a librarian who makes quilts in her spare time. The insurance company knows that both consumers are 40 years old, but the company has no information about occupations or hobbies. How does private information in this situation create an adverse selection problem? How could the insurance company address this problem?

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The Answer of Two consumers apply for life insurance with the same insurance company. George is a police officer who skydives in his spare time. Keira is a librarian who makes quilts in her spare time. The insurance company knows that both consumers are 40 years old, but the company has no information about occupations or hobbies. How does private information in this situation create an adverse selection problem? How could the insurance company address this problem?

Two Consumers Apply for Life Insurance with the Same Insurance