A death spiral is the worst case scenario for an insurance market, and it results in the collapse or near-collapse of the market. The term "death spiral" is often conflated with the concept of premium increases, regardless of whether the other aspects of a death spiral—dramatically shrinking enrollment and eventual market collapse—are present.
Is the postal service entering a death spiral?
He went into a death spiral and flew his plane into the Atlantic Ocean off the coast of Massachusetts. He said the Postal Service is entering a " death spiral " that will drive away customers and further decrease revenue. This war has no clear definition of victory - it's a death spiral that feeds on itself.
How do companies avoid the death spiral?
To avoid the death spiral, some companies attempt to allocate overhead costs based on activities and product complexities rather than simply spreading them on production machine hours. Also, some companies do not allocate the costs of excess capacity to products in order to minimize the death spiral.
How does a death spiral effect affect stock prices?
The type of bond or security that can cause the death spiral effect converts to predetermined value instead of a set number of shares of common stock. The more these instruments are converted, the more shares are created and the lower the share price will go. Ultimately a death spiral results and the company can be forced into bankruptcy.
