While primary dental care under state-funded schemes remains widely accessible, an increasing number of individuals are opting for private dental insurance (PDI) to cover cosmetic work, complex orthodontic treatments, and advanced oral surgery.
A typical PDI plan for a healthy 20-year-old costs approximately £140 per year, but this rises rapidly to over £880 per year for individuals aged 65 and above, where the frequency and cost of dental interventions are significantly higher. Insurers set premiums based on statistical risks, but individual health habits are difficult to monitor. PDI providers must spend substantial resources on check-ups and pre-enrollment screenings to verify dental health. Despite these checks, economists warn that the expansion of the PDI market is limited by market failure resulting from asymmetric information.
Using the information in Extract B, explain how 'asymmetric information' can lead to market failure in the market for private dental insurance.
