Final answer:
b) Marketing to low-risk individuals, tiered pricing, and restricting coverage Insurance funds employ tactics like targeting low-risk individuals, offering tiered pricing, and restricting coverage to manage risk selection. They also benefit from government mandates requiring insurance purchases which mix risk pools and allow prices to be based on market averages.
Step-by-step explanation:
The tactics available to insurance funds hoping to engage in risk selection primarily involve marketing strategies and policy design to attract low-risk individuals while dissuading high-risk customers from purchasing policies. These tactics include marketing to low-risk individuals, implementing tiered pricing to reflect varying levels of risk, and restricting coverage for high-risk activities or conditions. Selling insurance through employers can mix risk groups and prevent adverse selection, given that a workplace will have a variety of individuals with different risk levels. Additionally, government interventions such as mandating the purchase of certain types of insurance also address adverse selection by ensuring a pool of mixed risks, allowing insurers to set prices based on market averages and spreading the costs amongst those with different risk profiles.
Some tactics available to insurance funds hoping to engage in risk selection include marketing to low-risk individuals, implementing tiered pricing, and restricting coverage. By marketing to low-risk individuals, insurance funds can attract customers with lower risk profiles. Tiered pricing allows insurance funds to charge different premiums based on the level of risk associated with the policyholder. Restricting coverage helps insurance funds limit their exposure to high-risk individuals.