Minnesota Life Accident and Health Producer Practice Exam

Adverse selection is the tendency for those at higher risk to seek insurance before others, because they know more about their own health and risk than the insurer. This information gap means high‑risk applicants can be overrepresented in the insured pool, which raises expected claim costs and can push premiums higher or lead to stricter underwriting. Moral hazard, by contrast, refers to riskier behavior after coverage is in place, not the initial selection of applicants. Speculative risk involves choosing to take on risk for potential gain, not the dynamics of who buys insurance. In practice, insurers address adverse selection with underwriting, medical questions, and risk‑based pricing to keep the pool balanced.