In the market for automobile insurance, adverse selection implies that
A) drivers with greater risks want to buy a policy without deductibles.
B) drivers with greater risks want to buy a policy with large deductibles.
C) uninsured drivers will drive recklessly.
D) insured drivers will drive recklessly.

Question

Quizplus · Accepted Answer

Adverse selection occurs when those with higher risks are more likely to purchase insurance, such as policies without deductibles, because they anticipate needing more coverage.

In the Market for Automobile Insurance, Adverse Selection Implies That