Insurance markets are often plagued by problems of asymmetric information. In part, this is because insurance markets themselves exist only because of incomplete information—nobody knows what the future holds, so households pay insurance companies to bear the risk of an uncertain future. Both households and insurance companies have incomplete information, but problems arise because the information is asymmetrically incomplete.
Consider the market for medical insurance. What information might buyers in this market have that insurance companies don’t have? Here’s a harder question: What information might sellers of medical insurance have that buyers don’t have?