As the cost of automobile insurance rises,good drivers might reduce their coverage while poor drivers will likely maintain their coverage.This situation is known as moral hazard.

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This situation is described as adverse selection, not moral hazard. Adverse selection occurs when there is asymmetric information between buyers and sellers, leading to a situation where higher-risk individuals are more likely to purchase insurance, while lower-risk individuals opt out or reduce their coverage. Moral hazard, on the other hand, refers to the change in behavior of insured parties to take on more risks because they are protected by insurance.

As the Cost of Automobile Insurance Rises,good Drivers Might Reduce