adverse selection


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adverse selection

n.
The tendency of sellers to substitute low-quality products for high-quality products or of a uniformly priced service, such as insurance, to attract only the least profitable customers. Adverse selection arises from the inability of buyers to differentiate between high-quality and low-quality products or of sellers to differentiate between profitable and unprofitable customers.
References in periodicals archive ?
Because changes in markups were so pronounced, it is non-trivial to hold markups constant to calculate the change in welfare due to changes in adverse selection, using equation 2, leading to nonsensical values in some states.
A divorced economics professor applies the principles of microeconomics to his online search for a new life partner, attempting to find insights from search theory, signaling, adverse selection, statistical discrimination, supply and demand in thick markets, positive assertive matching, and network externalities.
Now we're able to provide important insight on where it falls in that range, and a carrier can underwrite it as competitively as possible to avoid adverse selection and maximize profitability."
In one of the best sections of the book, they put to rest the idea that there is rampant adverse selection in the market for health insurance; this mistaken belief seems to have been behind many health insurance economists' support of the Patient Protection and Affordable Care Act, better known as Obamacare.
Steve McKay, CEO of DriveFactor, said, 'With DriveFactor, we're giving the auto insurance market more flexibility to expand usage-based insurance, reduce adverse selection, and reward safer drivers.
(SIIA) today announced the release of a new white paper, Self-Insured Group Health Plans, Stop-Loss Insurance & Adverse Selection, which has been published to correct inaccurate information that state and federal policy-makers have been provided about how the self-insurance marketplace operates.
Such "adverse selection" drove prices up, which pushed firms with healthier employees out.
Unfortunately, while these cost savings may be attractive to the employer, they may, unintentionally, compound the problem through adverse selection. That is, the healthiest employees will, if so motivated and allowed by the organization's benefit package, simply drop the insurance or part of the insurance (e.g., family coverage) and seek a less expensive personal policy.
One thing the insurance company board spent a lot of time on was a seemingly endless discussion of adverse selection, one of the two bogeymen of the insurance industry.
Mandates serve to help attract low-risk individuals, which is necessary to prevent adverse selection to keep the health insurance markets viable.
We begin by using this framework to review the "textbook" adverse selection environment and its implications for insurance allocation, social welfare, and public policy.