I have a tendency to get very bored while I am driving my car and fall asleep behind the wheel. I have decided to seek the maximum amount of car insurance I can obtain. What does this situation reflect?

Question

Quizplus · Accepted Answer

This situation reflects the problem of moral hazard, which arises when people's behavior changes in response to changes in their insurance coverage. In this case, the individual is more likely to fall asleep behind the wheel if they have more comprehensive car insurance, since they know that the insurance will cover any accidents that result from their drowsiness. This creates a moral hazard problem for the insurance company, since they cannot directly observe the individual's behavior and cannot fully anticipate the risks associated with insuring them.

I Have a Tendency to Get Very Bored While I