Which of the following is an example of adverse selection?
A) The careful driver buys extra insurance protection when renting a car.
B) The sickest people buy health insurance.
C) The person with health insurance rides a motorcycle without wearing a helmet.
D) The person with life insurance exercises daily and eats healthy foods.

Question

Quizplus · Accepted Answer

Adverse selection occurs when individuals with a higher risk of needing insurance are more likely to purchase it. In this case, the sickest people are more likely to buy health insurance, which creates a pool of insured individuals who are more costly to cover.

Which of the Following Is an Example of Adverse Selection