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The insurance industry is susceptible to adverse selection problems, but not problems of moral hazard.
Adverse Selection
A situation in insurance and other markets where buyers and sellers have different information, leading those most likely to incur risks to seek insurance or contracts more aggressively.
Moral Hazard
The situation where one party is willing to take more risks because another party bears the cost of those risks.
Insurance Industry
A sector of the economy composed of companies that provide risk management through the contract of insurance policies, offering protection against financial loss.
- Identify the concerns linked to adverse selection and moral hazard, and provide descriptions.
- Analyze the effects of adverse selection on both the insurance industry and healthcare field.
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Learning Objectives
- Identify the concerns linked to adverse selection and moral hazard, and provide descriptions.
- Analyze the effects of adverse selection on both the insurance industry and healthcare field.
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