If John drives more recklessly because he has good automobile insurance it is an example of moral hazard.

Question

Quizplus · Accepted Answer

Moral hazard refers to the increased risk-taking behavior of an individual or entity once they are protected against losses. In this case, John's reckless driving behavior is a result of his confidence in his good automobile insurance, which will cover the costs of any potential accidents or damages. This increases the risk for the insurer and demonstrates moral hazard in action.

If John Drives More Recklessly Because He Has Good Automobile