Ban on airline safety ads. Sometimes one party to a transaction knows more about the product than the other. Used car seller and buyer Worker looking for a job Restaurant Life insurance This can tend to push the high quality goods out of the market, or even close the market entirely. But the problem can be solved with warrantees, reputation, or testing. Many economists think this is a big market failure, but the market has mostly solved the problem.
Most regulation focuses on banning the market's solutions to force equal terms for unequal products.
Banning pre-existing conditions clauses Subsidizing auto insurance for the reckless Insurance Markets and Moral Hazard Insurance markets let people pool risk. The main cost of supplying insurance is paying off claims. When it is illegal to charge risk-adjusted rates, the adverse selection problem becomes severe. Without pre-existing conditions clauses, the problem get worse. This just means that when someone pays for your accidents and problems, you may be inclined to take less effort to avoid accidents and problems.