Selection/anti-selection or adverse selection
taking advantage of inefficiencies in a provider’s pricing basis to secure better terms than might otherwise be justified, normally at the expense of the product provider
limit the extent to which rating factors can be used
- the ability of prospective policyholders to provide accurate responses to questions
- the cost of collecting information
Factors by which mortality and morbidity vary
- occupation
- nutrition
- housing
- climate/geography
- education
- genetics
- HIV status
Temporary initial selection
Where the level of risk diminished or increases since the occurrence of a selection process.
Class selection
Where a select group is taken from a population consisting of a mixture of different types of individual with different characteristics
Time selection
Where a select group is taken from a population of individuals from different calendar years
Adverse selection
Where the individual’s own choice influences the composition of a select group
Spurious selection
Where the distorting effect of a confounding factor gives the false impression that one of the forms of selection is present
Decrements and a selective effect
Decrements may be found to have a selective effect. A selective decrement will ‘select’ from the population lives whose rate of decrement from another cause differs from that of the whole population.
