2. Individuals who are poorer than average risks will attempt to obtain insurance at standard rates
Adverse selection represents a case where Individuals who are poorer than average risks will attempt to obtain insurance at standard rates.
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Adverse selection is when sellers have information that consumers do not have, or vice versa, about a particular aspect of product quality.
Example: It represents a case where Individuals who are poorer than average risks will attempt to obtain insurance at standard rates.