In terms of insurance,which of the following statements is explained by adverse selection?
A)A person with riskier behavior tends to be more likely to buy insurance.
B)A person who is more risk-averse tends to be more likely to buy insurance.
C)Insurance companies charge risk-averse customers a higher premium,since they need more peace of mind.
D)None of these statements is true.

Question

Quizplus · Accepted Answer

Adverse selection refers to the tendency for individuals with higher risk levels to be more likely to buy insurance. This is because they have a greater need for insurance coverage and are therefore more willing to pay for it. In contrast, individuals who are less risky may perceive insurance as unnecessary and may not purchase coverage.

In Terms of Insurance,which of the Following Statements Is Explained