An insured person's incentive to behave in ways that raise the probability of a claim is known as:
A)a moral hazard.
B)the lemons problem.
C)the problem of adverse selection.
D)the problem of advantageous selection.

Question

Quizplus · Accepted Answer

A moral hazard refers to the risk that an insured person will behave in a way that increases the likelihood of a claim, knowing that they are protected by insurance. This is because the insured person bears less of the financial cost of the claim than the insurer does. As a result, the insured may be more likely to take risks or engage in dangerous behavior, leading to more claims and potentially higher insurance premiums for everyone.

An Insured Person's Incentive to Behave in Ways That Raise