Adverse Selection

Adverse selection is a major concern in the insurance markets that requires intervention. Therefore it is essential to find solutions to mitigate adverse selection in a way that benefits the insurance company and the public, leading to a healthier society.Adverse selection is evident in all societies, and its effects are largely felt. The lack of coordinated information between the sellers and buyers explains the situation. As pointed out in the original post, a way to mitigate adverse selection is to change the policy and allow consumers to pay for insurance when needed (Finkelstein et al., 2019). The new policy would allow younger people to consider packages that are more suited to them. The new policy will also prevent the wastage of money for the younger people who are considered healthy. The insurance could also charge older patients since they are more likely to fall sick (Pardo, 2019). The insurance could, however, have a tailormade package for patients depending on their medical history. Therefore policymakers should provide more tailormade services.