A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance. What is this phenomenon called?

Question

Social Studies

Patricia Dorsey

12 October, 10:05

A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance. What is this phenomenon called?

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Adalynn Walters · Answer 1

Answer: asymmetric information

Explanation: This phenomenon happens when there is a knowledge gap between two parties, meaning when one party has more knowledge about a subject matter than the other. For example a property owner who wants to sell a particular property has more information about the property than the buyer. This problem is common in the financial industry, for example a loan officer has all the information and conditions that surrounds giving out a loan than the customer taking the loan. This situation could lead to making decisions with negative repercussions.