If insurance companies knew how risk-averse their customers were:

Question

Quizplus · Accepted Answer

If insurance companies knew how risk-averse their customers were, they would be able to price their policies more accurately and prevent adverse selection. Adverse selection occurs when people who are most likely to make a claim are the ones who purchase insurance, which can result in higher premiums for everyone. By understanding their customers' level of risk-aversion, insurance companies can set prices that are more appropriate for the risk pool.

If Insurance Companies Knew How Risk-Averse Their Customers Were