Verifying information and or placing caps on coverage

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In the insurance industry, it refers to situations in which an insurance company extends insurance coverage to an applicant where actual risk is substantially higher than the risk known by the insurance company. The insurance company suffers adverse effects by offering coverage at a cost that does not accurately reflect its actual risk exposure. The insured gains insurance at a cost that is below his/her true level of risk. Insurance company can protect themselves against adverse selection through; accurately identifying risk factor, or can put in systems for verifying information and or placing caps on coverage

Reference no: EM132896162

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