General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
Group health insurance typically experiences less adverse selection than individually issued coverage primarily because:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
In group insurance, eligibility is based on membership in the group, such as employment, rather than on individual health. Because participation is broad and often automatic, healthy people join along with the unhealthy, which dilutes the concentration of high risks. This broad, heterogeneous enrollment is why group coverage produces less adverse selection than individual policies, where each applicant decides whether to buy based on personal health and likely need for benefits.
Why the other options are wrong
- A) Group members are not always healthy; the point is that unhealthy members are offset by healthy ones.
- B) Group plans may still require evidence of insurability in some cases, such as small groups or late enrollees.
- C) Premium sharing arrangements do not determine adverse selection; enrollment patterns do.
Memory hook
Group coverage mixes the healthy and the sick together.