PlumBot: Bot: Creating new article from JSON

2026-03-10T12:43:36Z

Bot: Creating new article from JSON

New page

⚠️ '''Anti-selection'''—also known as [[Definition:Adverse selection | adverse selection]]—occurs in insurance when applicants who know or suspect they face a higher-than-average probability of loss are disproportionately drawn to purchase coverage, while lower-risk individuals opt out or buy less. This information asymmetry between the applicant and the [[Definition:Insurance carrier | insurer]] undermines the statistical assumptions on which [[Definition:Premium | premiums]] are based, because the pool of insureds becomes skewed toward worse risks. The term is used most frequently in [[Definition:Life insurance | life]], [[Definition:Health insurance | health]], and [[Definition:Disability insurance | disability]] lines, but it applies across all segments of the market.

🔍 Insurers combat anti-selection through a variety of [[Definition:Underwriting | underwriting]] mechanisms. In life insurance, medical questionnaires, paramedical exams, and prescription-database checks help the carrier assess risk before binding coverage. In [[Definition:Group insurance | group insurance]], mandatory participation thresholds and employer-contribution structures dilute the self-selection effect by ensuring a broad mix of healthy and less-healthy lives enter the pool. [[Definition:Waiting period | Waiting periods]], [[Definition:Pre-existing condition | pre-existing-condition]] clauses, and [[Definition:Contestability period | contestability periods]] function as additional safeguards. On the [[Definition:Insurtech | insurtech]] frontier, carriers are experimenting with continuous [[Definition:Underwriting | underwriting]] powered by wearable-device data and electronic health records, aiming to close the information gap in near-real time.

💡 Left unchecked, anti-selection can trigger a destructive spiral: as the risk pool deteriorates, the insurer must raise rates, which drives away more good risks, which further worsens the pool—a dynamic sometimes called a [[Definition:Death spiral | death spiral]]. The individual [[Definition:Health insurance | health-insurance]] market in the United States experienced this dynamic acutely before the Affordable Care Act introduced [[Definition:Individual mandate | individual-mandate]] provisions and [[Definition:Risk adjustment | risk-adjustment]] transfers. For [[Definition:Actuary | actuaries]] and product designers, anticipating and mitigating anti-selection is not an academic exercise; it is central to building a sustainable [[Definition:Book of business | book of business]] that can deliver stable [[Definition:Loss ratio (L/R) | loss ratios]] over time.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Adverse selection]]
* [[Definition:Moral hazard]]
* [[Definition:Underwriting]]
* [[Definition:Risk adjustment]]
* [[Definition:Information asymmetry]]
* [[Definition:Death spiral]]
{{Div col end}}

Definition:Anti-selection - Revision history

PlumBot: Bot: Creating new article from JSON