moral hazard

Definitions of "moral hazard"
  1. The risk that an insurance company could face a loss due to the actions or behavior of a policyholder. This risk is influenced by the policyholder's personal characteristics or situation
  2. The increased probability of investors taking on more risk because they are aware that any potential losses from these risks will be compensated by another entity, such as a governmental body
How to use "moral hazard" in a sentence
  1. The insurance company decided to raise the premium due to the moral hazard associated with insuring a building located in a high-crime area.
  2. During an economic downturn, some investors may act on moral hazard, knowing that the losses will be absorbed by the government.
  3. Moral hazard can encourage irresponsible behavior, as individuals or entities know that they won't have to bear the full cost of their actions.

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