Moral Hazard
/ˈmɒrəl ˈhæzərd/
Definitions
- (n.) A risk that a party insulated from risk may behave differently than if fully exposed, typically leading to negligent or unethical conduct in insurance or finance contexts.
The insurer increased premiums because of the moral hazard that policyholders might be less careful to avoid losses.
Forms
- moral hazard
Related terms
See also
Commentary
Commonly used in insurance and finance law, moral hazard highlights incentive problems when one party does not bear full consequences of their actions.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.