adverse selection
1
8.1
- noun
- /ˈæd.vɜrs sɪˈklɛk.ʃən/
- Specialized
:
selección adversa
- To mitigate adverse selection, insurers often require comprehensive medical information before issuing policies.
- hazard and adverse selection
- moral hazard and adverse selection
Examples
-
In health insurance, adverse selection occurs when healthier individuals avoid purchasing coverage, leading to higher costs for insurers.
-
However, if you increase your pool through adverse selection, then the costs of insurance will rise.
Blog text (33) -
The schools also suffered from adverse selection in teacher recruitment.
Blog text (14) -
Implementation could be further complicated by adverse selection in the exchanges.
Blog text (21) -
For a small public option, it seems mostly that the premiums will be higher because of adverse selection.
Blog text (14) -
A surcharge may be imposed on employers to prevent adverse selection.
Blog text (11) -
This adverse selection problem could be mitigated by creating information markets for the narrow, project-based contracts.
Academic text (2005) -
Create a temporary reinsurance program to help stabilize premiums during the first three years of operation of the exchanges when the risk of adverse selection due to enforcement of the new rating rules and market changes is greatest.
Blog text (11) -
The company faced challenges due to adverse selection, as only high-risk clients were interested in their insurance policies.
Synonyms
One side knows more about risk, causing losses for the other side, especially in insurance
How One-Sided
- Specialized
1
8.1
1
3.7
Surface Forms
Morphology
The components 'adverse' (unfavorable) and 'selection' (choice) give a B1 learner a general impression of an 'unfavourable choice', so part of the meaning is guessable from the words. However the phrase denotes a specific economic phenomenon (information asymmetry causing inefficient outcomes) that is technical and not fully predictable from the constituents, so it requires extra domain knowledge.
Etymology
Adverse selection comes from insurance and markets. Here adverse means 'bad' and selection means 'choosing'. Imagine a plan where only people who expect problems sign up, so the company ends up with the 'bad' group; that's why the term means 'a bad choice of customers because they know more than the seller'.