When the average buyer of an insurance policy is likely to have higher risk than others in his class,this is known as

Question

Quizplus · Accepted Answer

Adverse selection refers to a situation where individuals with a higher risk are more likely to purchase insurance than those with lower risk. This occurs because individuals have more information about their own risks than insurance companies do, and thus those with higher risks see more value in purchasing insurance. As a result, insurance companies are left with a pool of policyholders who are, on average, riskier than the general population.

When the Average Buyer of an Insurance Policy Is Likely