Rhode Island Insurance Adjuster Exam

Which of the following is an example of moral hazard?

1. Consistently driving recklessly

2. Properly locking doors before leaving

3. Regular maintenance of property

4. Following safety protocols

The correct answer is: Consistently driving recklessly

Moral hazard refers to a situation where a person is more likely to take risks or engage in behavior that is detrimental because they are insulated from the consequences of those actions. In this context, consistently driving recklessly serves as a clear illustration of moral hazard. This behavior shows a disregard for safety and the potential outcomes, possibly because the driver believes that any resulting damages or claims can be covered by insurance. Their actions are influenced by the comfort of knowing that they won't bear the full financial responsibility for their reckless driving. The other choices, such as properly locking doors, regular maintenance of property, and following safety protocols, reflect responsible behavior aimed at reducing risk. These actions contribute to safety and security rather than creating a situation where an individual feels encouraged to embrace risk without concern for the consequences. Therefore, option A embodies the concept of moral hazard, as it highlights how a person's behavior can be negatively influenced by the presence of insurance coverage.