Asymmetric Information Definition

Asymmetric Information

Asymmetric information describes a situation in which one party to a transaction or negotiation has more information than the other party. In other words, the information is lopsided or “asymmetric.” Insurance applications typically involve asymmetric information because the applicant will most likely know more, for example, about their own health conditions or driving habits than the insurance company. Insurance companies use underwriting to offset the effects of asymmetric information. Adverse selection is a glossary term related to asymmetric information.

Equity-Indexed Annuities Can be a Shell Game for Consumers

The first time I visited New York I was taken in a sidewalk shell-game within 45 minutes of being in the city—no kidding. Shell games involve trying to guess where a card or any other item might reside after being shuffled among various covers by a dealer.

There are basically three reasons why I lost $40 within 45 minutes of arriving in NYC: 1) I was naïve; 2) I was overconfident in my card-spotting abilities, and; 3) there was a large amount of asymmetric information—in other words, the “dealers” (to use a polite term) had a heck of...

Glossary:

Asymmetric Information

Indexed Annuity

Financial Advisor

Key Phrases Autotag:

Equity-indexed annuity

Incentives

Insurance Companies