Insurance firm's acceptance of applicants who are uninsurable (or at a greater than normal risk), but conceal or falsify information about their actual condition or situation. Approval of their application has an 'adverse' effect on insurance companies, because normal insurance premiums are computed on the basis of policyholders being in average good health and employed in non-hazardous environments. Also called antiselection.
Use 'adverse selection' in a Sentence
Making an adverse selection may not be the popular choice but it may be the best thing for your business at the time.
The insurance company investigators realized new policy-holder Louis was an adverse selection shortly after he was insured, when a slew of illnesses suddenly sent him to the hospital numerous times.
Sometimes an insurance company will accidentally take on an adverse selection and may look to try and find some reinsurance.
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