Factors Affecting Adverse Selection in Supplementary Health Insurance and Strategies to Reduce It (Case study of an Iranian Insurance Company)

Document Type : Research Paper


1 Department of Economics/Faculty of Social Sciences and Economics/ Alzahra University/ Tehran/Iran

2 Associate Professor, alzahra University,

3 Assistant Professor, Insurance Research Institute (affiliated to the Central Insurance of the Islamic Republic of Iran), Tehran

4 MA Economics Graduate, alzahra University, Tehran


Considering the position of supplementary health insurance in the insurance industry, it is important to address the problem of adverse selection as one of the effective factors for increasing the loss ratio in this industry. In this paper, the correlation model between individuals' risk appetite under the indemnity amount and coverage amount, insurance specifications, and insureds' demographic characteristics was used to identify potential variations and risk components that influence this phenomenon. The data used were taken from the 2019 group insured information of a selected insurance company. Due to the nature of the data, the Tobit regression method was used to estimate the model. The results show that the signs of the coefficients of the variables included in the model are as expected and statistically significant. In other words, the effective variables that determine to some extent the level of risk of the insured are directly related to the level of costs. Therefore, it is necessary to identify the components that influence the occurrence or increase of medical costs and take them into account when setting the premium rate.
JEL Classification: I13, D82, C34.


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Volume 56, Issue 3 - Serial Number 135
December 2021
Pages 535-554
  • Receive Date: 02 July 2021
  • Revise Date: 20 November 2021
  • Accept Date: 09 March 2022
  • First Publish Date: 09 March 2022