https://www.investopedia.com/terms/a/adverseselection.asp

Adverse selection refers generally to a situation in which sellers have information that buyers do not have, or vice versa, about some aspect of product quality. In the case of insurance, adverse selection is the tendency of those in dangerous jobs or high-risk lifestyles to purchase life insurance. To fight adverse selection, insurance companies reduce exposure to large claims by limiting coverage or raising premiums.

Adverse selection occurs when one party in a negotiation has relevant information the other party lacks. The asymmetry of information often leads to making bad decisions, such as doing more business with less-profitable or riskier market segments.

Adverse Selection in the Marketplace
A seller may have better information than a buyer about products and services being offered, putting the buyer at a disadvantage in the transaction. For example, a company’s managers may more willingly issue shares when they know the share price is overvalued compared to the real value; buyers can end up buying overvalued shares and lose money. In the secondhand car market, a seller may know about a vehicle’s defect and charge the buyer more without disclosing the issue.

Because of adverse selection, insurers find that high-risk people are more willing to take out and pay greater premiums for policies. If the company charges an average price but only high-risk consumers buy, the company takes a financial loss by paying out more benefits or claims. However, by increasing premiums for high-risk policyholders, the company has more money with which to pay those benefits.

For example, a life insurance company charges higher premiums for race car drivers. A car insurance company charges more for customers living in high crime areas. A health insurance company charges higher premiums for customers who smoke. In contrast, customers who do not engage in risky behaviors are less likely to pay for insurance due to increasing policy costs.

Moral hazard and adverse selection are two terms used in economics, risk management and insurance to describe situations where one party is at a disadvantage. Adverse selection occurs when there's a lack of symmetric information prior to a deal between a buyer and a seller, whereas moral hazard occurs when there is asymmetric information between two parties and change in behavior of one party after a deal is struck.

Conversely, moral hazard occurs when a party provides misleading information and changes his behavior when he does not have to face consequences of the risk he takes. For example, assume a homeowner does not have homeowners insurance or flood insurance and lives in a flood zone. The homeowner is very careful and subscribes to a home security system that helps prevent burglaries. When there are storms, he prepares for floods by clearing the drains and moving furniture to prevent damage.
However, the homeowner is tired of always having to worry about potential burglaries and preparing for floods, so he buys home and flood insurance. After his house is insured, his behavior changes and he is less attentive, he leaves his doors unlocked, cancels the home security system subscriptioni and does not prepare for floods. In this case, the insurance company is faced with the risks of floods and burglaries and their consequences, and the problem of moral hazard arises.