Insurance Alphabet: Letter A
A is for:
“ADVERSE SELECTION”
Adverse selection is the tendency for higher risks to seek more insurance coverage than lower risks.
Example: A 57 year old female with diabetes and a history of chronic illness would have a tendency to seek more health insurance coverage than a healthy 23 year old male.
Interesting Point: As it stands (starting in 2014) adverse selection will no longer be an underwriting consideration in the health insurance industry. Why? Because those who apply for coverage, must be accepted. This is known as guaranteed issue.
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