[PDF] Adverse Selection and Private Health Insurance Coverage in India A

How does information asymmetry affect the insurance market?

• Information asymmetry, such as adverse selection or moral hazard, may undermine proper functioning of the insurance market, i.e., market failures. On one hand, riskier agents are more likely to subscribe to insurance (i.e., adverse selection), leading to higher premiums or costly contracts.

What is information asymmetry?

• Information asymmetry happens when one party in an economic transaction has greater relevant knowledge than the other party. This typically happens when the seller of a good or service possesses greater knowledge than the buyer. But the reverse situation also happens. Almost all economic transactions involve information asymmetries.

Is there information asymmetry between health insurance status and health care consumption?

• We test for unobservables linking health insurance status and health care consumption. We find no evidence of informational asymmetries. This is the content viewer section. Skip to metadata section.

What are the challenges of asymmetric information?

• It also poses a challenge for empirical research: identifying and quantifying the effects of asymmetric information and tracing its implications for welfare, competition, and government policy. The empirical research in this area has advanced rapidly over the past decade.