An insurance company provides liability insurance to a restaurant protecting the owner against claims from customers. One area of coverage is protections against food poisoning claims. The insurance company may periodically send an employee into the restaurant to observe food preparation and food storage processes. The insurance company is trying to avoid:

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The insurance company is trying to avoid moral hazard, which is the risk that the insured party may take more risks or be less careful because they are insured. By periodically sending an employee to observe the restaurant's processes, the insurance company is trying to prevent the restaurant owner from being careless about food preparation and storage processes, which could lead to food poisoning claims. This reduces the risk for the insurance company and helps them to maintain low premiums.

An Insurance Company Provides Liability Insurance to a Restaurant Protecting