Larger deductible requirements decrease the risk of moral hazard.

Question

Quizplus · Accepted Answer

Moral hazard refers to the tendency of insured individuals to increase their risk-taking behavior when the cost of that behavior is borne by the insurer. By requiring a larger deductible, the insured individual has to pay more out of pocket before the insurance coverage kicks in. This means that they are less likely to engage in risky behavior, as they will bear more of the financial cost of any negative outcomes. Therefore, larger deductible requirements decrease the risk of moral hazard.

Larger Deductible Requirements Decrease the Risk of Moral Hazard