Why have Social Insurance? How can government intervention improve efficiency? Social insurance programs are compulsory the adverse selection problem is avoided because the low risks are forced to purchase the insurance policy as well In the private market, the low risks would be less likely than the high risks to purchase the insurance policy6 Why have Social Insurance? • How can government intervention improve efficiency? – Social insurance programs are compulsory: the adverse selection problem is avoided because the low risks are forced to purchase the insurance policy as well. – In the private market, the low risks would be less likely than the high risks to purchase the insurance policy