moral hazard

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  • noun

Words related to moral hazard

(economics) the lack of any incentive to guard against a risk when you are protected against it (as by insurance)

References in periodicals archive ?
This application indicates that government subsidisation of such insurance programs may create a morale hazard that increases climate change-related risks, even though such insurance may be provided as an adaptive response to reduce risk.
The New Zealand example illustrates how an alteration of an adaptive response--the removal of subsidies and, in particular, subsidized crop insurance--reduced the morale hazard.
Even where subsidized flood insurance is purchased, the evidence suggests that it creates a morale hazard that results in a higher risk of flood damage than would otherwise occur.
Consequently, it appears that one effect of subsidized flood insurance is to maintain the presence of higher value properties in areas where the peril of flooding exists--creating a morale hazard.
In fact, the entire premise on which subsidized flood insurance in the United States is based may be considered a morale hazard.