Moral hazard often arises in the case of insurance because
A)people generally underestimate the amount of insurance coverage needed.
B)insured people will not take sufficient care to reduce risks because the private benefit of reducing risks exceeds the private cost of reducing risks.
C)insured people will not take sufficient care to reduce risks because the private cost of reducing risks exceeds the private benefit of reducing risks.
D)insurance companies have no incentive to investigate fraudulent claims.
E)people who are in the most need of insurance have the most trouble obtaining insurance coverage.

Question

Quizplus · Accepted Answer

Moral hazard occurs when insured individuals take on more risks because they do not bear the full cost of those risks, as the insurance covers potential losses.

Moral Hazard Often Arises in the Case of Insurance Because