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Adverse Selection

   Also found in: Medical, Wikipedia 0.10 sec.
Adverse selection
Refers to a situation in which sellers have relevant information that buyers lack (or vice versa) about some aspect of product quality.

Adverse Selection
A sociological phenomenon in which those persons with the most dangerous lifestyles or careers are the most likely to buy life insurance policies. Adverse selection may also occur if those persons conceal or falsify relevant information when they apply for the insurance policy. This has the potential of economic hardship for life insurance companies because those most likely to receive a death benefit are the ones buying policies. This reduces profit potential. Life insurance companies attempt to counteract adverse selection by limiting coverage and/or raising premiums. Adverse selection is also called antiselection.


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It''s not a pleasant subject, but we need to discuss the suicide clause found in most life insurance policies It ties in with an insurance concept called adverse selection so let''s take a more in-depth look at how the suicide clause works in life insurance
Employers also are asking for larger group life insurance benefit maximums for their executives, which is causing unbalanced plan design and more adverse selection risk.
The readings are organized under six broad themes: bilateral contracting under asymmetric information and adverse selection; single-agent incentive problems and moral hazard; multilateral asymmetric information and mechanism or auction design; multi-agent incentive problems, moral hazard in teams, and the internal organization of firms; dynamic adverse selection of moral hazard, renegotiation, and relational contracts; and incomplete contracts and the theory of the firm.
 
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