Lisa,a homeowner,buys fewer fire extinguishers than her insurance company would prefer.What can we infer from this behaviour

Question

Quizplus · Accepted Answer

Lisa's behavior shows a lack of concern for potential losses and risks, suggesting a moral hazard problem. Moral hazard occurs when an insured party behaves in a riskier manner because they are protected by insurance, leading to increased costs for insurers. In this case, Lisa may feel she is protected by her insurance and is, therefore, less likely to take steps to minimize potential fire damage by purchasing more fire extinguishers.

Lisa,a Homeowner,buys Fewer Fire Extinguishers Than Her Insurance Company Would