Adverse Selection in Practice

This article about genetic testing presents a great example of adverse selection:

Pat Reilly had good reason to worry about Alzheimer’s disease: Her mother had it, and she saw firsthand the havoc it could wreak on a family, much of it financial. 

So Ms. Reilly, 77, a retired social worker in Ann Arbor, Mich., applied for a long-term care insurance policy. Wary of enrolling people at risk for dementia, the insurance company tested her memory three times before issuing the policy. 

But Ms. Reilly knew something the insurer did not: She has inherited the ApoE4 gene, which increases the lifetime risk of developing Alzheimer’s. “I decided I’d best get long-term care insurance,” she said.