General Insurance PrinciplesQuestion 183 of 315
Adverse selection is BEST described as:
a.The tendency of higher-than-average risks to seek insurance more aggressively than average risks
b.The agent's duty to recommend the lowest-priced policy
c.A producer accepting commission from two competing insurers
d.The insurer's right to deny renewal of any policy
Explanation
Adverse selection is the tendency of poorer-than-average risks to seek and obtain insurance. Underwriting standards exist specifically to control adverse selection by identifying and properly pricing or declining substandard risks.
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Sen Lin, PrepPass Founder · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)