In terms of insurance,which of the following statements is explained by adverse selection?
A) A person with riskier characteristics tends to be more likely to buy insurance.
B) A person who is more risk-averse tends to be more likely to buy insurance.
C) Insurance companies charge risk-averse customers a higher premium, since they need more peace of mind.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

Adverse selection occurs when individuals with higher risks are more likely to buy insurance. This makes it difficult for insurance companies to accurately price their policies and can lead to higher premiums for everyone.

In Terms of Insurance,which of the Following Statements Is Explained