Multiple choice

What is expected from an agent when he detects a moral hazard?

  1. Continue with the insurance as before

  2. Report the same to the insurer

  3. Ask for a share in the claims

  4. Turn a blind eye
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Hazards can be classified into physical and moral. Physical hazard refers to the risk arising from material features of the subject matter of insurance, whereas moral hazard may arise from human weakness (e.g. dishonesty, carelessness, etc.) or from general economic and social conditions. At the operating level, ratemaking process involves assessment of physical and moral hazards. An insurance agent should report to the insurer any detection of moral hazard.

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