Why Insurers Are Wrong about Adverse Selection

R. Guy Thomas
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R. Guy Thomas: School of Mathematics, Statistics and Actuarial Science, University of Kent, Canterbury CT2 7FS, UK

Laws, 2018, vol. 7, issue 2, 1-8

Abstract: Insurers typically argue that regulatory limits on their ability to use genetic tests will induce ‘adverse selection’; they say that this has disadvantages not just for insurers, but also for society as a whole. I argue that, even on its own terms, this argument is often flawed. From the viewpoint of society as a whole, not all adverse selection is adverse. Limits on genetic discrimination that induce the right amount of adverse selection (but not too much adverse selection) can increase ‘loss coverage’, and so make insurance work better for society as a whole.

Keywords: insurance; adverse selection; loss coverage; genetic testing; genetic discrimination (search for similar items in EconPapers)
JEL-codes: D78 E61 E62 F13 F42 F68 K0 K1 K2 K3 K4 (search for similar items in EconPapers)
Date: 2018
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