Which of the following would be considered an example of adverse selection?
A) Malpractice insurance may increase the amount of malpractice.
B) Drivers may be less cautious because they have airbags installed in a car.
C) Those individuals who most need insurance are the ones most likely to buy it.
D) Work contracts that give a set number of sick-days may encourage more workers to call in sick.

Question

Quizplus · Accepted Answer

Adverse selection occurs when those who are most likely to make a claim are the ones who are most likely to purchase insurance. In this case, those who most need insurance are the ones most likely to buy it.

Which of the Following Would Be Considered an Example of Adverse