Between‐Group Adverse Selection: Evidence From Group Critical Illness Insurance

Item Type Journal paper
Abstract This article demonstrates the presence of adverse selection in the group insurance market. Conventional wisdom suggests that group insurance mitigates adverse selection because it minimizes individual choice. We complement this conventional wisdom by analyzing a group insurance scenario in which individual choice is excluded, and we find that group insurance alone is not effective enough to eliminate adverse selection; that is, between‐group adverse selection exists. Between‐group adverse selection, however, disappears over time if the group renews with the same insurer for a certain period. Our results thus indicate that experience rating and underwriting based on information that insurers learn over time are important in addressing adverse selection.
Authors Eling, Martin; Jia, Ruo & Yao, Yi
Journal or Publication Title The journal of risk & insurance
Language English
Keywords Adverse Selection, Information Asymmetry, Learning Over Time, Group Insurance, Critical Illness Insurance
Subjects economics
HSG Classification contribution to scientific community
Refereed Yes
Date 2017
Publisher American Risk and Insurance Ass.
Place of Publication Malvern, Pa.
Volume 84
Number 2
Page Range 771-809
ISSN 0022-4367
ISSN-Digital 1539-6975
Publisher DOI
Official URL
Depositing User Ruo Jia
Date Deposited 18 Feb 2014 13:09
Last Modified 30 Oct 2018 17:37


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Eling, Martin; Jia, Ruo & Yao, Yi (2017) Between‐Group Adverse Selection: Evidence From Group Critical Illness Insurance. The journal of risk & insurance, 84 (2). 771-809. ISSN 0022-4367

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