The intentional lie told to the insurer to obtain a favourable premium is an example of asymmetric information.
Asymmetric information is when one of the parties in a transaction has more information than the other party in the transaction. The party with more information has an advantage over the party with less information. In this question, the party with more information in the client.
Adverse selection is an effect of asymmetric information. Adverse selection is when the seller of a product chooses a client based on the false information provided.
Another effect of asymmetric information is moral hazard. This is when a party whose risk is insured acts in a different way than he would have acted if his risks were not insured.
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