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- DictionaryMor·al haz·ard/ˈmôrəl ˈhazərd/
noun
- 1. lack of incentive to guard against risk where one is protected from its consequences, e.g. by insurance.
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Jun 24, 2024 · What Is Moral Hazard? Moral hazard is the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity.
- Will Kenton
- 1 min
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In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk knowing that its insurance will pay the associated costs.
Mar 31, 2021 · Moral hazard involves one party taking risks that others will have to pay for. Those who pay the costs often lack complete information about those who take the risks. Moral hazard may exist in a variety of spheres, including insurance, lending, investing, and more.
Learn what moral hazard is and how it affects financial transactions. See how it originated in the insurance industry and how it played out in the 2008 financial crisis.
The meaning of MORAL HAZARD is a situation in which a party is incentivized to risk causing harm because another party is obligated to remedy the consequences of the harm caused; specifically : the possibility of loss to an insurance company arising from the character or circumstances of the insured.
Oct 12, 2022 · Moral hazard is when one party can act recklessly because another party will bear the costs. Learn how moral hazard affects insurance, banking, and politics with three examples.
Jul 23, 2024 · Moral hazard is a term used to describe how a person or an organization tends to indulge in risky undertakings by knowing they are protected against the consequences. The risk-taking party has minimal responsibility towards the loss and its cost, which instigates them to do so.