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Adverse selection

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The tendency of individuals with poorer-than-average risks to buy and maintain insurance. Adverse selection arises when insureds select only those coverages which are most likely to result in losses. In agricultural insurance, this can arise when: - high-risk farmers or farmers using backward practices participate, while other farmers, with more certain production expectations, do not; - farmers apply for insurance only on their own high-risk crops or plots, withholding other units.


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