morale hazard

Popular Terms
Circumstance that increases the probability of occurrence of a loss, or a larger than normal loss, because of an insurance-policy applicant's indifferent attitude after the issuance of policy. For example, he or she might be careless in locking the doors and windows when leaving home. In common usage, morale hazard indicates that the insured party unconsciously changes their actions or behaviors, as opposed to a deliberate change in order to cheat the system or benefit from his or her circumstances. Compare with moral hazard.


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