A premium death spiral occurs when healthy people leave an insurance pool, which causes premiums to increase, and that causes more people to leave the pool, which results in even higher premiums.

Question

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A premium death spiral occurs in insurance when healthier individuals opt out of coverage due to rising premiums, leading to a riskier pool of insureds. This causes insurers to raise premiums further to cover the increased risk, which in turn prompts more healthy individuals to leave, perpetuating the cycle.

A Premium Death Spiral Occurs When Healthy People Leave an Insurance