In practice,insurance companies faced with adverse selection use _____ to deal with it.
A)moral hazard
B)deductibles
C)signals
D)co-pays

Question

Quizplus · Accepted Answer

Insurance companies use signals to deal with adverse selection. A signal is any action taken or characteristic possessed by an individual that provides information to the insurance company about the individual's risk level. For example, a person who regularly goes to the gym or does not smoke may signal to the insurance company that they are a lower risk individual and therefore may receive lower premiums.

In Practice,insurance Companies Faced with Adverse Selection Use _____ to Deal