Self-selection
Definition of "Self-selection"
Effort of a poor risk to seek insurance coverage. The onset of a health problem such as heart disease, for example, may prompt a person to apply for life insurance before seeking medical treatment. Such applicants, if not screened out, would weight the insured pool toward bad risks. The underwriting process is intended to counter the natural tendency toward self-selection among insurance applicants, either by requiring higher rates for poorer risks or by denying them coverage.
Popular Insurance Terms
Conversion of form of ownership from a mutual insurance company to a stock insurance company. Interest in demutualization of life insurance companies surged in the early 1980s among many ...
Trust in which the trustee distributes capital and income to the beneficiaries of the trust according to their economic needs. ...
Procedure for accumulating, conserving, and distributing personal wealth. In essence, estate planning focuses on enhancement of the value of an estate and its conservation. At the death of ...
Factor applied in retrospective rating in order to increase the basic premium to cover state premium taxes for liability and workers compensation insurance. For example, if a state premium ...
Nonparticipating life insurance under which the first few annual premiums are smaller than would be the case under a traditional nonparticipating policy. While the maximum amount of these ...
actual fire losses divided by the total value of the property exposed to the peril of fire; actual losses resulting from fire divided by the total fire amount of in-force business. ...
Situation in which several liability insurance policies are in force to cover the same risk, thereby resulting in higher limits of coverage than is required to adequately insure the risk. ...
Buy or sell order for security that expires at the end of the trading date on which it was entered if not executed. ...
Insurance coverage purchased on the same item from two or more insurance companies. ...
Have a question or comment?
We're here to help.