Health insurance companies face an asymmetric information problem because

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Health insurance companies face an asymmetric information problem because the buyers have superior information concerning their risk of illness or injury. This can lead to adverse selection, where the individuals with a higher risk of illness or injury are more likely to purchase insurance, leading to higher costs for the insurance company. To mitigate this, companies may use underwriting or risk assessment techniques to try to determine the risk profile of each potential customer.

Health Insurance Companies Face an Asymmetric Information Problem Because