By requiring that applicants for insurance policies fill out lengthy forms and take a physical examination,insurers attempt to guard against _____

Question

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Insurers attempt to guard against adverse selection, which is the tendency for people with a higher risk of loss to seek out insurance coverage more often than those with a lower risk of loss. By requiring extensive information and examinations, insurers can screen out high-risk individuals and set premiums based on their perceived risk level. This helps to prevent the costs of paying out claims from being driven up by a disproportionate number of high-risk policyholders.

By Requiring That Applicants for Insurance Policies Fill Out Lengthy