Final answer:
The risk of high-risk individuals seeking insurance more than average is called adverse selection, which can strain the insurance system and cause premiums to increase, making insurance inaccessible for some.
Step-by-step explanation:
The risk that individuals of higher than average risk will seek out or purchase insurance policies is called adverse selection. Adverse selection is a common problem in insurance markets where individuals with a greater likelihood of making insurance claims than the general population are more inclined to buy insurance, often without providing full information about their higher risk level to insurers. This situation is problematic as it may lead to a scenario where insurance premiums need to be raised, potentially making insurance unaffordable for lower-risk individuals or resulting in losses for the insurance company.
One example of adverse selection could involve a person who knows they are more likely to need healthcare due to their family history but does not disclose this information when purchasing health insurance, leading the insurer to underprice the risk.