Betty obtains an auto insurance policy and then begins to drive ten miles per hour faster on the highway.This behavior is indicative of:

Question

Quizplus · Accepted Answer

Betty's behavior of driving faster on the highway after obtaining auto insurance is indicative of moral hazard. Moral hazard refers to the situation where an insured person takes more risks or acts recklessly because of the protection offered by insurance. In other words, Betty is more likely to speed because she knows that in case of an accident, the insurance company will pay for the damages. This behavior increases the insurer's risk and ultimately leads to higher premiums for everyone.

Betty Obtains an Auto Insurance Policy and Then Begins to Drive