What describes the insuring of risks that are more prone to losses compared to the average risk?

The correct choice, adverse selection, refers to the phenomenon where individuals with a higher risk of loss are more likely to seek insurance coverage than those with lower risks. In insurance, this can lead to a situation where the insurer ends up with a disproportionate number of high-risk policyholders.

Adverse selection occurs because individuals who know they are at greater risk for certain events (like illness, accidents, or other claims) are more likely to purchase insurance. As a result, insurers might face unexpected losses if they do not account for the risk profile of their clientele appropriately. This can impact their profitability and ability to provide coverage sustainably.

The other options focus on different aspects of insurance and risk management. Risk management involves strategies to mitigate, transfer, or eliminate risks but does not specifically describe the selection of high-risk individuals for insurance. High-risk insurance refers to policies designed specifically for high-risk individuals, but it doesn't encapsulate the concept of adverse selection itself. Underwriting is the process insurers use to assess risk and determine appropriate premiums but does not inherently reflect the continuous imbalance caused by adverse selection.