The tendency for unhealthy people to seek life insurance rates is an example of: a) fundamental...

The tendency for unhealthy people to seek life insurance rates is an example of:

a) fundamental risk
b) morale hazard
c) adverse selection
d) moral hazard

Expert Solution

Answer: adverse selection

Adverse selection occurs when the applicants with higher than the average chances of loss seeks insurance at standard rate. In the case of insurance, adverse selection is the tendency of those in high risk lifestyles and dangerous jobs to get life insurance . In order to fight adverse selection, insurance companies decrease exposure to large claims by raising premiums or less coverage.

keosha answered 2 years ago

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