What is meant by the term adverse selection? - ProProfs Discuss
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What is meant by the term adverse selection?

Asked by Scar lett, Last updated: Sep 16, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The tendency of people with greater than average exposure to loss to purchase insurance-answer d is correct. adverse selection means the tendency of people with a greater than average exposure to loss to purchase insurance coverage. for example, if insurers only sold earthquake coverage to applicants in earthquake-prone areas, or flood insurance only to those in flood-prone areas, the situation known as adverse selection would exist. insurers and underwriters guard against adverse selection by trying to sell broad ranges of coverages to a large cross-section of the population in order to increase the premium base and spread the risk of loss.
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