adverse selection

USAGE SUMMARY

"adverse selection" is a correct and usable phrase in written English.
It is typically used in economics or business contexts to refer to the phenomenon of a disproportionately high number of undesirable or high-risk individuals being selected for a particular activity or transaction. Here is an example sentence: "The insurance company's strict medical requirements were put in place to combat adverse selection among their policyholders, as they were finding that only those with pre-existing conditions were signing up for coverage."

✓ Grammatically correct

News & Media

Science

Formal & Business

Human-verified examples from authoritative sources

Exact Expressions

55 human-written examples

Economists call it adverse selection.

The New Yorker

The answer is "adverse selection".

The Economist

Adverse selection is perhaps the direst threat.

The New York Times

Sure, there will be some adverse selection.

The New York Times

This is an "adverse selection" problem.

The Economist

Adverse selection is not the only risk.

The New York Times

"Adverse selection" is guaranteed by the program's voluntary and competitive nature.

The New York Times

The reason is "adverse selection" -- a problem that afflicts many markets, but insurance markets in particular.

The New York Times

Mandating that the elderly join an insurance plan would prevent adverse selection.

The New York Times

These problems are compounded in the drug insurance market by a phenomenon known as adverse selection.

The New York Times

QUESTION FROM Y: How significant do you think the adverse selection problem is for online dating?

The New Yorker

Expert writing Tips

Best practice

When discussing insurance or financial markets, use "adverse selection" to highlight situations where one party has more information than the other, leading to imbalanced risk.

Common error

Avoid using "adverse selection" interchangeably with moral hazard. Adverse selection occurs before a contract, due to asymmetric information, while moral hazard occurs after a contract, due to changes in behavior.

Linguistic Context

The phrase "adverse selection" functions as a noun phrase that describes a specific economic phenomenon. Ludwig AI confirms its accurate and common usage in various contexts. It typically acts as the subject or object of a sentence, identifying a process or problem within a market or system.

Expression frequency: Very common

Frequent in

News & Media

37%

Science

36%

Formal & Business

27%

Less common in

Encyclopedias

0%

Wiki

0%

Reference

0%

Ludwig's WRAP-UP

In summary, "adverse selection" is a frequently used noun phrase that describes an economic problem arising from information asymmetry. Ludwig AI confirms it's grammatically correct and primarily found in formal contexts like news, science, and business. When writing about insurance, finance, or markets, using "adverse selection" can precisely identify scenarios where imbalanced information causes market inefficiencies. It's important to distinguish it from moral hazard. To enhance clarity, consider alternatives such as "unfavorable selection" or "risk asymmetry" for varied expression.

More alternative expressions

Phrases that express similar concepts, ordered by semantic similarity:

Unfavorable selection

Highlights the negative consequences or outcomes associated with the selection.

Distorted selection

Highlights the deviation from a desired or expected selection process.

Unbalanced risk pool

Highlights the disproportionate representation of high-risk individuals.

Pernicious selection

Emphasizes the harmful or destructive nature of the selection process.

Selection bias

Indicates a systematic error in the selection process that leads to skewed results.

Risk asymmetry

Focuses on the imbalance of information and risk between parties.

Asymmetric information hazard

Emphasizes the potential dangers arising from unequal access to information.

Information asymmetry problem

Emphasizes the role of unequal information in creating the issue.

The lemons problem

Specifically refers to the issue of low-quality goods dominating a market due to information asymmetry.

Market failure due to asymmetric information

Identifies adverse selection as a specific type of market failure caused by information imbalances.

FAQs

How is "adverse selection" typically used in a sentence?

The phrase "adverse selection" is used to describe a situation where information asymmetry leads to a market imbalance, often in insurance or finance. For example, "The company implemented stricter screening to mitigate "adverse selection" among its clients".

What's the difference between "adverse selection" and "moral hazard"?

"Adverse selection" occurs before a transaction due to asymmetric information (e.g., sicker people buying more insurance). Moral hazard, on the other hand, happens after the transaction, when one party changes their behavior because they are shielded from risk (e.g., driving more recklessly after getting insurance).

What are some real-world examples of "adverse selection"?

Examples include health insurance markets where people with pre-existing conditions are more likely to buy insurance, or used car markets where sellers know more about the car's defects than buyers.

How can companies minimize the effects of "adverse selection"?

Companies can use strategies like mandatory participation, risk-based pricing, or gathering more information to reduce the impact of "adverse selection".