The problem that moral hazard poses in insurance markets is that once you insure against a bad thing,
A)the bad thing becomes more likely to happen.
B)the benefits of having insurance are reduced.
C)individual incentives to avoid the bad thing rise.
D)the need for insurance is reduced.

Question

Quizplus · Accepted Answer

Moral hazard in insurance markets refers to the phenomenon where individuals or entities become more likely to engage in risky behavior or care less about preventing a negative outcome because they are insured against it. This means that once insured, the likelihood of the insured event happening may increase because the insured party has less incentive to avoid it.

The Problem That Moral Hazard Poses in Insurance Markets Is