General Insurance PrinciplesQuestion 183 of 716
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 legal duty to recommend the lowest-priced policy available in the market
c.A producer accepting commissions from two competing insurers on the same application without disclosure
d.The insurer's contractual right to deny renewal of any policy it finds unprofitable
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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PrepPass team · 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)