Suppose Dave drives more recklessly when he has car insurance than when he does not have car insurance. This is an example of the moral hazard problem associated with insurance.

Question

Suppose Dave drives more recklessly when he has car insurance than when he does not have car insurance. This is an example of the moral hazard problem associated with insurance.​

Quizplus · Accepted Answer

This is an example of the moral hazard problem because having insurance might lead Dave to take greater risks, knowing that the financial consequences of an accident are mitigated by his insurance coverage.

Suppose Dave Drives More Recklessly When He Has Car Insurance