Question

The phenomenon in which an insured individual takes less care in preventing the event against which she is insured is an example of

double coincidence of wants.

moral hazard.

adverse selection.

foolish behavior.

Answer 1

Answer: Moral hazard

Explanation: Moral hazard can be defined as a situation in which an individual starts taking more risk, which he can avoid, knowing the fact that the potential loss of the risk taken will be bore by someone else.

       For example- An Individual not making proper fire extinguishing facilities in the house knowing that the loss in case of fire will be bore by the insurance company.

Hence, above explanation concludes that answer is option B.