Skip to main content
Insurance

Adverse selection

One concept in finance that is often overlooked is the phenomenon of adverse selection. This refers to the inclination of individuals who face higher risks to seek out more insurance coverage compared to those with lower risks. As a result, insurers may respond by either increasing premiums or refusing to provide coverage altogether. This can be particularly evident in natural disasters, such as earthquakes, where adverse selection can lead to a concentration of risk rather than its dispersion. To combat this, insurance is most effective when risk is distributed among a large pool of policyholders.

Related terms

Contingent Beneficiary

Understand the meaning and definition of Contingent Beneficiary in the context of stock market, trading, and investments.

MORE
Other insurance clauses

Understand the meaning and definition of Other insurance clauses in the context of stock market, trading, and investments.

MORE
Excess of loss reinsurance

Understand the meaning and definition of Excess of loss reinsurance in the context of stock market, trading, and investments.

MORE
Guaranteed Addition

Understand the meaning and definition of Guaranteed Addition in the context of stock market, trading, and investments.

MORE
Variable annuity

Understand the meaning and definition of Variable annuity in the context of stock market, trading, and investments.

MORE
Reasonable expectations

Understand the meaning and definition of Reasonable expectations in the context of stock market, trading, and investments.

MORE

Open Free Demat Account!

Join our 3.8 Cr+ happy customers

+91
Explore other categories
Enjoy Zero Brokerage on Equity Delivery
10 Cr+DOWNLOADS

Enjoy Zero Brokerage On Stock Investments

Get the link to download the App

Scan this QR code to download the app
Get it on Google PlayDownload on the App Store