Which of the following is a characteristic of risks associated with adverse selection?

Adverse selection occurs when there is an imbalance of information between parties, typically within an insurance context. This situation arises when individuals seeking insurance have information about their own risk levels that insurers do not possess. As a result, those who know they are higher risks are more likely to seek insurance, leading to a concentration of high-risk individuals within the insured pool.

This phenomenon results in a greater-than-average chance of loss for insurers, because the pool of insureds has a higher likelihood of filing claims compared to a random selection of individuals. Insurers may charge premiums based on average risk assessments; however, when the actual risk is considerably higher due to adverse selection, this creates a scenario where claims exceed the premiums collected.

Conversely, the other options reflect characteristics that do not align with adverse selection. The average chance of loss implies a balanced pool of risks, while predictable and low loss likelihood suggests a well-managed and risk-appropriate insurance scenario. Finally, the notion of no associated financial risk does not hold in the context of adverse selection, as it fundamentally implies that there are risks that could lead to significant financial repercussions for the insurer.