General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Group health insurance tends to reduce adverse selection compared with voluntary individual coverage primarily because:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Adverse selection weakens when people cannot pick and choose coverage based on their health. In group insurance, eligible employees are covered automatically as a class — particularly under noncontributory plans where the employer pays the full premium — so the healthy do not systematically opt out and the sick do not disproportionately join. This whole-class pooling dilutes self-selection and makes the group's loss experience more predictable.
Why the other options are wrong
- B) Group premiums are typically based on the group's aggregate experience, not on each member's individual medical history.
- C) Group plans do not guarantee zero claims; members still file claims and losses remain fortuitous.
- D) Employers commonly contribute to group premiums; contribution is permitted and contributory plans are widespread.
Memory hook
Whole class in = no cherry-picking. Automatic enrollment is the anti-adverse-selection vaccine.