Some automobile owners will drive faster knowing that they are covered by health and automobile insurance.This behavior creates the problem of ________.

Question

Quizplus · Accepted Answer

Moral hazard refers to the tendency of individuals to take higher risks or engage in riskier behavior when they are protected against those risks. In this case, the fact that an automobile owner is covered by health and automobile insurance may lead them to drive faster with the knowledge that they will be protected from any potential accidents or injuries. This behavior increases the likelihood of accidents, ultimately resulting in higher insurance costs for both the individual and the insurance company.

Some Automobile Owners Will Drive Faster Knowing That They Are