If insured drivers decide to drive more recklessly than uninsured drivers do, then an adverse selection has occurred.

Name: If insured drivers decide to drive more recklessly than uninsured drivers do, then an adverse selection has occurred.
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Question

Quizplus · Accepted Answer

Adverse selection occurs when there is asymmetric information before a transaction, leading to high-risk individuals being more likely to purchase insurance. Reckless driving by insured drivers is an example of moral hazard, not adverse selection.

If Insured Drivers Decide to Drive More Recklessly Than Uninsured