Which of the following statement regarding moral hazard and adverse selection in the insurance industry is CORRECT?

Question 24 options:

	Moral hazard refers to an insurance market process where bad results occur due to information asymmetry prior to insurance purchase.
	Adverse selection is the tendency of the insured to be more careless after he/she has purchased the insurance.
	Insurance market faces both moral hazard and adverse selection problems, and they both may drive up the insurance cost (or premiums).
	None of the above is correct.