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long-term care market, we found strong evidence in this market of adverse selection and a positive association between risk and risk aversion.
Because insurance is a risk shifting mechanism, adverse selection in the purchase of insurance may be influenced by the length and type of contract (e.
1996) and the adverse selection component of the spread ([theta]) as in George, Kaul, and Nimalendran (1991).
This cycle, or "death spiral," of adverse selection is a significant concept in underwriting and an important reason to understand how rigorous the other insurers in your market are compared to your current methods.
And a large segment of the uninsured comprises healthy individuals who may voluntarily choose to forego health insurance at existing premiums as predicted by adverse selection theory.
For example, Kim (1985) developed an adverse selection model in which car owners' maintenance and upkeep decisions affected the quality of used cars.
In particular, this article investigates the issue of whether different financial instruments (including debt, common equity, preferred equity, and convertible securities) attract different types of entrepreneurial firms in terms of the adverse selection risks associated with financing low-quality firms in relation to the financial security used.
The classic example of a market for used cars highlights the market failure associated with adverse selection.
Another insurance geek term, adverse selection is something you're unlikely to come across unless you actually work in insurance.
This could result in adverse selection with greater numbers of people needing health care to elect it, which would increase the cost of health coverage.
The need to counter adverse selection is the motivation for most insurance underwriting today.
The authors study government interventions in markets suffering from adverse selection.