Charging drivers with good records lower premiums than drivers with bad records is an example of an attempt by insurance companies to deal with the problem of

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This is an example of an attempt to deal with adverse selection, which is the tendency for people with higher risk to seek out insurance more than people with lower risk. By charging drivers with good records lower premiums, insurance companies are trying to attract low-risk customers while discouraging high-risk ones. This helps to balance out the risk pool and prevent insurance companies from only insuring high-risk individuals.

Charging Drivers with Good Records Lower Premiums Than Drivers with Bad