Adverse selection is the process of making a decision without having all of the knowledge needed. It is a term commonly used in the insurance industry, when applicants withhold information from an ...

Adverse selection in health insurance happens when sicker people—or those who present a higher risk to the insurer—buy health insurance while healthier people don’t buy it. Adverse selection can also ...

In an extreme case, the poor risks will be the only purchasers of coverage, and the insurer can expect to lose money on each policy sold. This situation, referred to as adverse selection, occurs when ...