Question: What is meant by the Adverse Selection Problem : Customers who seek (apply) for insurance policies are less likely to be the most in need

  1. What is meant by the Adverse Selection Problem:
    1. Customers who seek (apply) for insurance policies are less likely to be the most in need of coverage (to claim);
    2. Customers are foolish with insurance policies often choosing expensive policies they do not need;
    3. Insurance companies often invest in securities that are too safe to provide the income needed to meet their expected claims;
    4. Customers who seek (apply) for insurance policies are more likely to be the most in need of coverage (claim)

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