ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Moral hazard can be divided into two types when it involves asymmetric information (or lack of verifiability) of the outcome of a random event. An ex ante moral hazard is a change in behavior prior to the outcome of the random event, whereas ex post involves behavior after the outcome.

Detailed explanation-2: -Moral hazard is the idea that insurance promotes risk-taking for personal gain. Moral hazard describes a conscious change in behavior to try to benefit from an event that occurs. Conversely, morale hazard describes an unconscious change in a person’s behavior when he is insured.

Detailed explanation-3: -It occurs when the borrower knows that someone else will pay for the mistake he makes. This in turn gives him the incentive to act in a riskier way. This economic concept is known as moral hazard.

Detailed explanation-4: -A morale hazard, according to the International Risk Management Institute (IRMI), is defined as a subjective hazard that tends to increase the probable frequency or severity of loss due to an insured peril. It can be described as one’s indifference to loss or increased carelessness due to the presence of insurance.