Question
It is a situation in which one party gets involved in a
risky situation where the party knows that it is protected through insurance and the other party will incur the loss?Solution
Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It refers to behavioral changes that might occur and increase the risk of loss when a person knows that insurance will provide coverage.Â
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