The tendency of those who are insured to take more risks is a problem of:
A) free riding.
B) moral hazard.
C) adverse selection.
D) positive externalities.

Question

Quizplus · Accepted Answer

Moral hazard is the tendency of individuals to take more risks when they are insured or protected from risk. This behavior results in increased costs for insurers and can lead to a rise in premiums for all policyholders. This problem is commonly observed in health insurance, where people may engage in risky behavior because they know they are covered by insurance. Therefore, the best choice is B) moral hazard.

The Tendency of Those Who Are Insured to Take More