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adverse selection vs moral hazard

n the video, two types of information asymmetry are explained: adverse selection and moral hazard. Adverse selection occurs when there's an information asymmetry between buyers and sellers, leading to a higher risk selection. For example, in health insurance, if premiums are too high, only less healthy individuals (who need insurance the most) will purchase it, resulting in a skewed risk pool. Moral hazard, on the other hand, happens after a transaction. In this case, once an individual, like Peter, buys car insurance, the insurance company cannot monitor his driving behavior. If Peter feels protected, he might take more risks, such as speeding, which exemplifies moral hazard.