The company correctly anticipates the adverse selection problem in this situation by charging a premium of $2500.

Both Nadia and Samantha are applying to insure their respective cars (valued at $10,000 each) against the possibility of being stolen. Nadia lives in a secure neighborhood, where the probability of theft is 10%. Samantha lives in a less secure neighborhood where the probability of theft is 25%. They are both risk-averse, and so each is willing to pay "$100 over expected loss" for insurance