Adverse Selection

Pronunciation: /ədˈvɜrs səˈlɛkʃən/

Definitions of adverse selection

noun the process of a person seeking insurance coverage being more likely to have high-risk characteristics, which can lead to higher premiums or denial of coverage

Example Sentences

A1 Adverse selection is when only the riskiest individuals choose to participate in a program.

A2 Insurance companies use various strategies to mitigate adverse selection.

B1 Understanding adverse selection is crucial for designing effective insurance policies.

B2 Economists study how adverse selection affects markets and pricing.

C1 Adverse selection can lead to market inefficiencies and distortions.

C2 Policy makers need to address adverse selection to ensure fair and efficient markets.

Examples of adverse selection in a Sentence

formal The insurance company had to adjust their policies to account for adverse selection among their customers.

informal The car dealership was worried about adverse selection when offering a discount to anyone who traded in their old vehicle.

slang The team captain knew there was some adverse selection going on when picking players for the game.

figurative In the world of investing, adverse selection can be like trying to find a needle in a haystack.

Grammatical Forms of adverse selection

• plural: adverse selections
• comparative: more adverse selection
• superlative: most adverse selection
• present tense: adverse selection
• future tense: will experience adverse selection
• perfect tense: has experienced adverse selection
• continuous tense: is experiencing adverse selection
• singular: adverse selection
• positive degree: adverse selection
• infinitive: to experience adverse selection
• gerund: experiencing adverse selection
• participle: experienced adverse selection

Origin and Evolution of adverse selection

First Known Use: 1960 year

Language of Origin: English

Story behind the word: The term 'adverse selection' originated in the field of insurance and was first used to describe the situation where individuals with higher risk levels are more likely to purchase insurance than those with lower risk levels.

Evolution of the word: Over time, the term 'adverse selection' has expanded beyond insurance to describe situations in various industries where one party has more information than the other, leading to potentially unfavorable outcomes.