​Adverse selection in insurance requires that

A) ​potential customers face different levels of risk
B) potential customers facing more risk are no more interested in purchasing insurance
C) people are not risk averse
D) ​insurers can tell higher risk people from lower risk people

Adverse Selection

Adverse selection is a situation in financial markets where there is asymmetric information leading buyers or sellers to make decisions that can result in the market becoming skewed or unbalanced, often seen in insurance markets.

Insurance

A contract represented by a policy, where an individual or entity receives financial protection or reimbursement against losses from an insurance company.