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You know what? Why do health insurance prices feel unfair?
In modern society, the price of health insurance has often become a frequently discussed topic. Especially during the economic downturn, the increase in health insurance costs has made it unbearable for many families. People can't help but ask, why is there such a huge difference in insurance costs? The reason behind this may be hidden in the problem of information asymmetry.
“Information asymmetry is a situation in which one party has more or better information than the other party.”
To put it simply, information asymmetry creates an imbalance of power between buyers and sellers in transactions. This phenomenon is particularly evident in the insurance sector. When policyholders do not fully disclose their past medical history when it comes to health issues, insurance companies are unable to fully assess their risk. As a result, the information gap between policyholders and insurance companies may lead to an increase in insurance premiums. For example, people with chronic diseases may still be insured at ordinary premiums, which is undoubtedly an unfair burden on healthier policyholders.
In the insurance market, information asymmetry can lead to "adverse selection". This means that people with higher risks are more inclined to buy health insurance, while people with low risks may choose not to buy it because they suspect that the insurance price is too high, thereby worsening the overall risk structure of the market. As lower-risk policyholders are gradually lost, insurance rates rise further due to the concentration of high-risk policyholders, forming a vicious cycle.
“The so-called adverse selection phenomenon will cause some high-quality insurance providers to exit the market.”
This phenomenon demonstrates the wear and tear and collapse crisis of the insurance market under information asymmetry. The continuation of this situation may lead to a shortage of insurance products, or even in extreme cases, some people are completely unable to obtain necessary insurance protection.
Another concept related to information asymmetry is "moral hazard", which means that after obtaining insurance protection, policyholders begin to behave in an irresponsible direction. For example, policyholders may neglect physical health because they believe the insurance company will be responsible no matter what happens. This puts insurance companies under greater pressure to settle claims, thereby pushing up insurance prices.
“The existence of moral hazard makes it more difficult for insurance companies to predict high-risk behavior.”
Based on the above, the problem of information asymmetry is actually a structural problem, related to the health and stability of the entire insurance market. In this case, insurance companies need to use more methods to combat information asymmetry, including but not limited to solutions such as implementing mandatory health examinations and optimizing information sharing channels. Through screening, insurance companies can classify risks for different policyholders and set different premiums, thereby reducing losses caused by information asymmetry.
However, in addition to insurance companies, consumers themselves also need to show higher transparency and integrity in this process, which can not only ensure their own insurance interests, but also maintain the fairness of the entire market. But can this really be achieved?
