The tendency for the poorest risks to buy health insurance at a high premium is an example of moral hazard.

Question

The tendency for the poorest risks to buy health insurance at a high premium is an example of moral hazard.​

Quizplus · Accepted Answer

This is an example of adverse selection, not moral hazard. Adverse selection occurs when those most likely to use insurance are the ones who purchase it, often leading to higher premiums. Moral hazard, on the other hand, refers to the change in behavior when someone is protected from risk, such as taking more risks because they have insurance.

The Tendency for the Poorest Risks to Buy Health Insurance