Okuzeka
Insurance vocabulary · Underwriting & Risk

Adverse selection

Meaning in insurance, with examples

nounAdvanced term

In insurance, adverse selection means: The tendency for people with higher risk to be more likely to buy insurance, which causes losses if the insurer cannot tell the difference.

In Turkish: ters seçim, olumsuz seçim

How it is used

Discussed by actuaries and underwriters when they design products. Health questions, waiting periods and group schemes help protect against adverse selection. Also called 'anti-selection'.

Example sentences

  1. Without health questions, the product would attract people who are already ill, a classic case of adverse selection.

  2. Group health plans reduce adverse selection because everyone in the company joins.

Common collocations

  • risk of adverse selection
  • protect against adverse selection
  • adverse selection problem
  • anti-selection
  • moral hazardThe risk that people become less careful, or act dishonestly, because they know they are insured.
  • waiting periodA set time after a policy starts during which some benefits cannot yet be claimed, common in health and life insurance.
  • underwritingThe process of studying a risk, deciding whether to insure it and setting the price and conditions of the policy.
  • pre-existing conditionA health problem that a person already had, or had symptoms of, before their health or life insurance started.

More terms: Underwriting & Risk

Practise with graded reading

Reading at the right level is the fastest way to make new words stick. Pick free English books by level:

This page explains English vocabulary for learners. It is not financial advice.