Evidence of Adverse Selection in the Group Insurance Market
30 Pages Posted: 21 Feb 2014 Last revised: 5 May 2014
Date Written: February 17, 2014
This paper demonstrates the existence of adverse selection in the group insurance market with no individual choice. We provide evidence against the “conventional wisdom” that group insurance mitigates adverse selection because of the mixture of high risks and low risks. We show, however, that asymmetric learning effects mitigate the group adverse selection after a few policy periods.
Keywords: Information Asymmetry, Asymmetric Learning, Insurance Decision, Group Health Insurance, Critical Illness Insurance
Suggested Citation: Suggested Citation