Here is the synopsis of our sample research paper on Asymmetrical Information; Testing for Adverse Selection in the Insurance Industry. Have the paper e-mailed to you 24/7/365.
Essay / Research Paper Abstract
This 9 page paper considers how testing propositions involving information asymmetries is inherently difficult and discusses this in the context of the available evidence for the existence of adverse selection in insurance markets. The bibliography cites 8 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEadverse.rtf
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Unformatted sample text from the term paper:
information giving rise to the potential for adverse selection on the part of the insurance companies. The argument, in very basic terms, is that those parties who are at greater
risk, will be more active is seeking cover and gaining the lower rate premiums as they know they are more likely to make a claim, but this is information that
is not known to the insurer, or is only indicated in limited terms rather than explicitly. The problem is the way the testing takes place where there is asymmetry of
information due to the lack of all data required. The implication is that the companies who are most likely to make adverse
selections are those who are inflating the cover for the lower risk parties to decrease cover for higher risk parties. This proposed paradigm is true regardless of the subject of
the insurance from automobile cover to crop and life insurance. Insurance companies will seek to minimise the impact of this potential influence but due to the asymmetric nature of the
information the risk is seen as present. The difficulty is on testing for this influence and the level to which it will or can occur. Objective research seeks to
gather all data and then analysis the inclusive data. The initial problem with asymmetric information is the lack of data on one side of the equation. This means the generation
of the input data is form the results of the insurance, such as accident rates compared to the type of contract chosen.
Numerous studies have taken place, but the results have not always been as expected, such as the use of bulk discounts, and the covariance between quality and risk being negative,
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