Adverse selection occurs when
A) a person takes more risks that are not known to the life insurance company because he has life insurance.
B) a person buys life insurance because he has a risky lifestyle that is not known to the life insurance company.
C) a person is a risk lover.
D) pregnant women with health insurance make more doctor visits than uninsured pregnant women.

Question

Quizplus · Accepted Answer

Adverse selection occurs when individuals with a higher risk of loss are more likely to seek insurance coverage than those with a lower risk of loss. In this case, a person with a risky lifestyle is more likely to buy life insurance, which increases the risk for the insurance company.

Adverse Selection Occurs When