General Insurance PrinciplesQuestion 579 of 716
Insurers combat adverse selection primarily through:
a.Increasing their advertising budgets
b.Shortening the policy's free-look period
c.Underwriting, medical questions, exclusions, and waiting periods that screen higher-risk applicants
d.Paying producers substantially higher commissions so they will bring in a larger overall volume of new insurance applicants
Explanation
Adverse selection, the tendency of higher-risk people to seek coverage, is controlled by careful underwriting and provisions that filter or price risk. Advertising, commissions, and free-look length do not address it.
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Related questions on this topic
- The principle of indemnity, which limits recovery to the actual amount of a loss, generally does NOT apply to life insurance because a life policy is:
- A stranger-originated life insurance (STOLI) arrangement is prohibited primarily because:
- Which relationship most clearly satisfies insurable interest for a life insurance policy?
- The producer's role in field underwriting includes:
- The Medical Information Bureau (MIB) assists insurers by:
- In using MIB data, an insurer may NOT:
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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)