Hi all, On page 8 of chapter 6 of ST1: it says that there is 'virtual absence of anti-selection' for this type of IP policy. But I think there is still some incentive for insured to anti-select. So I don't quite get the 'virtual absence'. Could anyone explain it? Thank you Terry
I think there is probably a bit of scope for anti-selection, but as the premium for this additional need would be so small, I guess we can probably ignore it. Or maybe it means that you might select against the insurer generally when buying IP, but the degree of anti-selection would be virtually no higher if you bought some additional sum insured to cover your insurance premiums / pension contributions.
A two-part argument, I'd guess; firstly, you only take this kind of policy out to cover the premiums of a policy you already have. Secondly, the kind of person who anti-selects is unlikely to have already taken out a policy without anti-selecting against that policy.
possibly because with most contracts the benefit will not kick in immediately and so effectively you would have to be without income for a point in time which for 99.9% of the poultaion wouldn't be a desirable place.
