Competition in insurance industry, due to the expansion of insurance demand in all its fields, especially in life insurance, has highlighted the significance of information distribution. Therefore, it is important to consider issues such as ADVERSE SELECTION, in order to prevent low pricing and insurer's bankruptcy risks. We have used life insurance data of an insurance company to test this phenomenon. According to the Rothschild-Stiglitz theory of separating equilibrium, high risk policyholders demand full coverage with fair premiums while low risk policyholders demand partial coverage with lower (and fair) premiums. As a result of this, using EVeiws software and the reduction in life insurance full coverage (decrease in death benefit) we have identified that different variables affect the level of policyholder's risk (death risk) which is intuitive.Finally, we calculate a risk index using statistically significant variables (which show increasing and decreasing risk levels for policyholders with positive and negative signs). The significance of annual premium and life insurance demand as an index of ADVERSE SELECTION is also estimated. Thus the hypothesis of ADVERSE SELECTION is not rejected.

Objective: Information asymmetry and its problems are one of the most important issues in the insurance industry. Asymmetric information between insurer and insured can severely affect insurance companies' profit and pose significant risks to them. One of the most important risks arising from asymmetric information is ADVERSE SELECTION risk. ADVERSE SELECTION is the tendency of high risks to be more likely to buy insurance or to buy larger amounts than low risks. ADVERSE SELECTION is an important source of inefficiency in insurance markets. In this regard, the main purpose of this study is to investigate the risk of ADVERSE SELECTION in Iran's health insurance industry. Methodology: In this study we use a model of demand for health services to incorporate the essential features of asymmetric information in health insurance markets. This model is based on the work of Bajari et al. (2014) and Culter & Zeckhauser (2000). The used data is extracted from the cost and income inventory of the urban and rural households in Iran in 2016. In order to test the existence of ADVERSE SELECTION in the Iranian health insurance industry, at the first step, using the nonlinear least squares (NLS) method the demand function for health services is estimated, and employing the estimated parameters, the latent health status variable of each household is obtained. Afterwards, the latent health status distribution between the two groups of insured and uninsured households are compared using Kolmogorov-Smirnov statistic test. Findings: The result of the two-sample Kolmogorov– Smirnov test shows that the distribution of latent health variable is not equal in two groups of insured and uninsured households. In other words, there is a significant difference between the health status of insured and uninsured households. As well as, a comparison of the distribution of latent health status between insured and uninsured households shows that on average the level of latent health of insured households is lower than that of uninsured households. Therefore, existence of ADVERSE SELECTION in the Iranian insurance industry is confirmed. Also, according to the results, the risk aversion parameter of households for consumption of health services (􀟛 􀬶 ) equals to 0. 1109 and for consumption of other goods ( 􀟛 􀬵 ) is equal to 0. 0226. This result implies that households are more risk averse with respect to health status than to the aggregate consumption commodity. Conclusion: The results confirm the existence of ADVERSE SELECTION in the Iranian health insurance industry. In addition, the results show that risk aversion for the consuming health services is higher than other goods consumption. Therefore, it is essential that health insurance companies plan and act to reduce the risk of ADVERSE SELECTION. We also presented some strategies to minimize the ADVERSE SELECTION risk.

ADVERSE SELECTION appear when insured persons have information about their risk that is not observed by insurers. Under these circumstances, insurers are unable to identify customer risk and they are forced to offer the same contract based on the average of all their customers. It is clear that offering such a similar contract will be relatively more attractive to high-risk customers. In contrast, it is not very pleasant for customers who have less risk. This will gradually drive low-risk customers out of the insurance industry. The end result will be that such a situation will prevent a stable balance in the market and it allows the market to collapse completely. In the present study, the phenomenon of ADVERSE SELECTION, which is one of the side effects of asymmetric information, in the basic health insurance market in Iran, it has been studied and tested. To test the research hypothesis, that is, to confirm the existence of an ADVERSE SELECTION, household budget data between 1993 and 1994 have been used. Attempts have been made to make the model under the least parametric assumptions, to be able to test ADVERSE SELECTION in health insurance. Also, unlike all previous models, the uncertainty of repayment and its amount was considered in this model, which is much more consistent with reality. The results confirm the ADVERSE SELECTION in health insurance, health care and social security in Iran.

The presence of the phenomena of ADVERSE SELECTION in Iranian life insurance market which is one of the side effects of asymmetric information causing inefficiencies and market failure is studied and examined in this research. To test the research's hypothesis, i.e. presence of ADVERSE SELECTION, required data was collected from individuals with different risk aversion levels through cluster sampling.The presence of this phenomenon was confirmed in Iranian life insurance market using the ordinary least square regressions. The results show factors like gender, doing hard and risky activities, risk level, that monthly salary of a family and illness and individuals’ prediction of their healthy life span confirms the presence of ADVERSE SELECTION. On the other hand, the phenomenon called advantageous SELECTION is confirmed by variables such as education, worry for future and law-breaking behavior.

Background: Existence or non-existence of ADVERSE SELECTION in insurance market is one of the important cases that have always been considered by insurers. ADVERSE SELECTION is one of the consequences of asymmetric information. Theory of ADVERSE SELECTION states that high-risk individuals demand the insurance service more than low risk individuals do.Methods: The presence of ADVERSE SELECTION in Iran’s supplementary health insurance market is tested in this paper. The study group consists of 420 practitioner individuals aged 20 to 59. We estimate two logistic regression models in order to determine the effect of individual’s characteristics on decision to purchase health insurance coverage and loss occurrence. Using the correlation between claim occurrence and decision to purchase health insurance, the ADVERSE SELECTION problem in Iranian supplementary health insurance market is examined.Results: Individuals with higher level of education and income level purchase less supplementary health insurance and make fewer claims than others make and there is positive correlation between claim occurrence and decision to purchase supplementary health insurance.Conclusion: Our findings prove the evidence of the presence of ADVERSE SELECTION in Iranian supplementary health insurance market.

According to the article (8) of the group supplementary health insurance regulation No. 74, which insurance companies are required to comply with it from the beginning of 2011, insurance companies are allowed to take medical check-up and examination from the small groups with less than 50 members, and with respect to the result of inspections, reject some of the firm’ s employees, or not to provide coverage for maternity cost and illnesses that have a previous history. The purpose of this study is to investigate the effect of this regulation on ADVERSE SELECTION in small firms by using group health insurance administrative data during the period of 2011-2016. In order to investigate about the hypothesis of the research, which states that the implementation of the article (8) of this regulation reduces the amount of ADVERSE SELECTION in small firms, we use regression discontinuity design (RDD) method. Results of this study indicate that the implementation of this law has no effect on the reduction of ADVERSE SELECTION in small firms. Furthermore, our findings show that this law motivates insured groups to increase the number of applicants for insurance up to the level of the threshold (50 employees).

In this paper, we try to present a theoretical model for participatory contracts in the form of principal agent model in an asymmetric information conditions in game theory framework. Using the principal agent model, how can we solve the advrsSELECTION problem in the Islamic banking contracts and provide a simpler and less costly model? There are two hypotheses to answer the research questions. One is the use of acheivments of principal agent model in participatory contracts is more efficient. Another is the using principal agent model in an Islamic environment would minimize the adversSELECTION problem in this model.The results obtained from solving of the proposed model shows that by designing participatory contracts in a banking system the first hypothesis of the research is confirmed, also the results of the model confirms the cost of participation contracts in an adnersSELECTION environment. The most important consequence of this research the possibility of of the elimination asymmetric information condition between the bank and the client if the parties adhere to the religious and Islamic regulations, this will confirm the second hypothesis of the research. In addition it has been shown that the financial instruments in Islamic economics as new achievement of economics are usable.