Question

Which of the following describes the increase in the probability of a loss due to an insured's dishonest tendencies?

a) Moral hazard
b) Insurable interest
c) Underwriting
d) Risk pooling

Answer 1

The correct answer is a) Moral hazard. Moral hazard refers to the increases in risky behavior resulting from efforts to make that behavior safer. In the context of insurance, it describes the situation where an insured individual engages in riskier behavior because they know they are protected by insurance.

Step-by-step explanation:

The correct answer is a) Moral hazard.

Moral hazard refers to the increases in risky behavior resulting from efforts to make that behavior safer. In the context of insurance, it describes the situation where an insured individual engages in riskier behavior because they know they are protected by insurance. This can lead to an increase in the probability of a loss due to the insured's dishonest tendencies.