One problem with insurance is that it allows people to live in flood plains. This is an example of adverse selection.

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This statement is not an accurate example of adverse selection. Adverse selection occurs when individuals or businesses who are at a higher risk of a certain event (such as illness or car accidents) are more likely to purchase insurance, leading to a higher overall cost for the insurer. Living in a flood plain and purchasing flood insurance is not an example of adverse selection, as anyone in the area would be equally at risk and eligible for the insurance. The decision to live in a flood plain is a separate issue related to zoning regulations and personal preferences.

One Problem with Insurance Is That It Allows People to Live