Information technology and information asymmetry: the future of private individual health insurance

The amount of available information, and the statistical ability to find patterns in it fundamentally alter risk pooling. This threatens to alter the structure of the insurance industry, and potentially to destroy insurability, as we will see. While too much information destroys risk pooling and rating, too little information, or one party with far more information than the other, likewise can destroy the structure of the industry. The regulatory implications, not yet understood, will be profound. The authors present the results of their analyses of the relationships among consumers´ riskiness and risk aversion, information asymmetry, adverse self selection, policy pricing, and consumer choice, including choice among alternative forms of insurance policies. They review selected references, including those on information technology and market segmentation, and on information endowment and the insurance industry specifically