Page 300 - Ebook health insurance IC27

The Insurance Times

Adverse selection
Adverse selection (or sometimes called anti-selection) is the tendency of persons who
are vulnerable to specific losses to purchase insurance to cover those particular losses.
For example, a person who has a history of illness would be very interested in obtaining
medical insurance. If such applicants are successful in obtaining the coverage, we say
that the insurer is "adversely selected against."

Adverse selection can never be completely eliminated. However, stringent underwriting
measures may reduce the risk. Policy provisions are also used to control adverse
selection. Examples of such provisions are the preexisting condition clause in medical
insurance. These policy provisions are discussed in greater detail later in the text when
specific insurance contracts are analyzed.

Section 2
Applying Insurance Principles to Medical Insurance

Introduction
Medical insurance shares the same general principles applicable to any other classes of
insurance.

Principles of insurance
Principles of insurance are:

Insurable Interest
The principle of insurable interest is the legal right to insure and it means that the person

304 Guide for Health Insurance