# Adverse Selection

*Macro & Economy — Finicade finance glossary*

Adverse selection is what happens when the party with better information self-selects into a deal — the sickest buy insurance, the worst cars are for sale.

Adverse selection is what happens when the party with better information self-selects into a deal: the sickest people buy the most insurance, and the worst used cars are the ones for sale. Left unchecked it unravels markets, because prices set for the average attract only the below-average. Screening, underwriting, warranties and mandatory participation are all attempts to defeat it.

**Also known as:** asymmetric information, lemons problem, information asymmetry

**Related terms:** [Moral Hazard](https://finicade.com/glossary/moral-hazard), [Underwriting](https://finicade.com/glossary/underwriting), [Insurance](https://finicade.com/glossary/insurance), [Due Diligence](https://finicade.com/glossary/due-diligence), [Disclosure](https://finicade.com/glossary/disclosure)

Source: https://finicade.com/glossary/adverse-selection