Moral hazard implies that
A)Insured individuals exercise less care because they have less incentive to do so
B)Insured individuals exercise more care because they have less incentive to do so
C)Insured individuals exercise more care because they have more incentive to do so
D)Insured individuals exercise less care because they have more incentive to do so

Question

​Moral hazard implies that
A)​Insured individuals exercise less care because they have less incentive to do so
B)Insured individuals exercise more care because they have less incentive to do so
C)Insured individuals exercise more care because they have more incentive to do so
D)​Insured individuals exercise less care because they have more incentive to do so

Quizplus · Accepted Answer

Moral hazard refers to the tendency of insured individuals to take greater risks or engage in riskier behavior than they otherwise would because they are insulated from the potential costs of those behaviors by insurance. In other words, because they know they will be protected from financial consequences if something goes wrong, they may be more likely to behave recklessly or carelessly, which can lead to more frequent or severe losses for the insurer.

​Moral Hazard Implies That

Moral Hazard Implies That