Question about Health Insurance Market. Let's imagine that there are 2 types of people: Type 1’s...

Question about Health Insurance Market. Let's imagine that there are 2 types of people: Type 1’s who are likelier to get a disease, and Type 2’s who are not as likely to get a disease. Imagine a readily available cheap test is developed that figures out with certainty if an individual will get sick or not. What will happen to the insurance market after this is developed? Who will benefit from this development?

Expert Solution

With this development, the insurance firms can easily find out the immunity levels of each individual. This makes it easier for them to set appropriate premiums for each individual based on their sensitivity to catch diseases.

This will benefit the insurance company or insurance providers as they will be saved from the problem of adverse selection.

Rahul Sunny answered 2 years ago

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