1. Moral hazard Physical hazard Hazard Morale hazard
Theo chose to leave his car in an unsafe neighborhood, unlocked and with the keys in the ignition, hoping that it will be stolen so he can get an insurance payment for it. This is an example of:
Moral hazard
Physical hazard
Hazard
Morale hazard

2. Moral hazard - occurs when an insured person consciously and deliberately acts in a way that is more likely to result in a loss.
Physical hazard - A physical condition that increase the chance of a loss
Hazard - an instance, behavior, or condition that increases the chance of incurring a loss, or increases the severity of the loss.
Morale hazard - Takes place when insured acts differently because of the comfort that insurance protection provides

3. Moral hazard Physical hazard Hazard Morale hazard
Theo chose to leave his car in an unsafe neighborhood, unlocked and with the keys in the ignition, hoping that it will be stolen so he can get an insurance payment for it. This is an example of:
Moral hazard
Physical hazard
Hazard
Morale hazard

4. Abdul is indifferent to any losses he may suffer
Abdul has a treacherous drive to work every day. Not only does he have to drive down the pothole-strewn access road to the highway, but he also must traverse several icy bridges on the way to work. Why does the insurance company call these hazards “physical hazards”?
Abdul is indifferent to any losses he may suffer
Abdul doesn’t consciously choose to take this route
The roads present a physical condition that increases the chance of a loss
They take a toll on Abdul physically, increasing the chance of a loss.

5. Moral hazard - occurs when an insured person consciously and deliberately acts in a way that is more likely to result in a loss.
Physical hazard - A physical condition that increase the chance of a loss
Hazard - an instance, behavior, or condition that increases the chance of incurring a loss, or increases the severity of the loss.
Morale hazard - Takes place when insured acts differently because of the comfort that insurance protection provides

6. Abdul is indifferent to any losses he may suffer
Abdul has a treacherous drive to work every day. Not only does he have to drive down the pothole-strewn access road to the highway, but he also must traverse several icy bridges on the way to work. Why does the insurance company call these hazards “physical hazards”?
Abdul is indifferent to any losses he may suffer
Abdul doesn’t consciously choose to take this route
The roads present a physical condition that increases the chance of a loss
They take a toll on Abdul physically, increasing the chance of a loss.

7. Will has just created a morale hazard
Will’s house suffered structural damage in an earthquake last year, but his policy does not cover earthquake damage, so Will never got it fixed. When heavy winds rips through her neighborhood, it causes some roof damage totaling $2400, and Will sees an opportunity in the situation. He files a claim for the roof damage, but also claims that the tornado caused the structural damage to her house that was actually caused by the earthquake last year. Which of the following statements is true?
Will has just created a morale hazard
Will has just committed hard fraud
Will has just committed soft fraud
Will has just created a physical hazard

8. Hard Fraud -- Deliberately planning of faking a loss
Soft “opportunistic” Fraud -- Exaggerating a claim to inflate indemnity
Physical Hazard -- In auto insurance, worn out breaks presents a physical hazard by increasing the risk for all drivers on the road.
Morale Hazard -- Takes place when insured acts differently because of the comfort that insurance protection provides

9. Will has just created a morale hazard
Will’s house suffered structural damage in an earthquake last year, but his policy does not cover earthquake damage, so Will never got it fixed. When heavy winds rips through her neighborhood, it causes some roof damage totaling $2400, and Will sees an opportunity in the situation. He files a claim for the roof damage, but also claims that the tornado caused the structural damage to her house that was actually caused by the earthquake last year. Which of the following statements is true?
Will has just created a morale hazard
Will has just committed hard fraud
Will has just committed soft fraud
Will has just created a physical hazard

10. Morale hazard Moral hazard Fraud Physical hazard
Lewis owns a computer store, and he spends many hours a day on the sales floor demonstrating his products to customers. He often gets very animated when showing the electronics and, although he does not intend for anything bad to happen, he doesn’t worry too much about handling them carefully, since he knows that his insurance policy will cover any damages. This behavior would be called a:
Morale hazard
Moral hazard
Fraud
Physical hazard

11. Fraud - the act of deliberately perverting, altering, or misrepresenting the truth, or willfully deceiving an insurer in order to realize financial gain.
Morale hazard – acting careless or differently because insurance is in place
Moral hazard - A moral hazard occurs when an insured person consciously and deliberately acts in a way that is more likely to result in a loss.
Physical hazard - All insured items are exposed to a variety of physical hazards, ranging from environmental to material, operational, or occupational

12. Morale hazard Moral hazard Fraud Physical hazard
Lewis owns a computer store, and he spends many hours a day on the sales floor demonstrating his products to customers. He often gets very animated when showing the electronics and, although he does not intend for anything bad to happen, he doesn’t worry too much about handling them carefully, since he knows that his insurance policy will cover any damages. This behavior would be called a:
Morale hazard
Moral hazard
Fraud
Physical hazard

13. Which of the following is an example of a moral hazard?
The road that leads to Ralph’s house is steep and narrow
Bart lights a candle, sets it right next to the window drapes and leaves the house to go to work
Homer falls asleep with a lit cigarette in her hand
Edna is jamming out to her music while driving to work and accidentally runs a red light

14. Which of the following is an example of a moral hazard?
The road that leads to Ralph’s house is steep and narrow – physical hazard
Bart lights a candle, sets it right next to the window drapes and leaves the house to go to work - intentional
Homer falls asleep with a lit cigarette in her hand - unintentional
Edna is jamming out to her music while driving to work and accidentally runs a red light – morale hazard

15. Which of the following is an example of a moral hazard?
The road that leads to Ralph’s house is steep and narrow
Bart lights a candle, sets it right next to the window drapes and leaves the house to go to work
Homer falls asleep with a lit cigarette in her hand
Edna is jamming out to her music while driving to work and accidentally runs a red light
A moral hazard occurs when an insured person consciously and deliberately acts in a way that is more likely to result in a loss.

16. Which of the following statements about a moral hazard is FALSE?
A moral hazard increase risk
It is a hazard caused by human behavior
It is reckless behavior because of security offered by insurance
It is the result of an unconscious behavior

17. A moral hazard occurs when an insured person consciously and deliberately acts in a way that is more likely to result in a loss.
All conscious acts committed with a hope to defraud the insurance company are moral hazards.
Results from the policyholder’s deliberate decision
Involves reckless behavior because of the financial security offered by insurance

18. Which of the following statements about a moral hazard is FALSE?
A moral hazard increase risk
It is a hazard caused by human behavior
It is reckless behavior because of security offered by insurance
It is the result of an unconscious behavior

19. Hazard Morale hazard Physical hazard Moral hazard
Marge has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it off and leaves it in her car’s cupholder so she can put it back on in the morning on her way to work. Marge’s behavior would be a considered a:
Hazard
Morale hazard
Physical hazard
Moral hazard

20. Moral hazards involve deliberate, immoral behavior
Marge has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it off and leaves it in her car’s cupholder so she can put it back on in the morning on her way to work. Marge’s behavior would be a considered a:
Moral vs Morale:
Moral hazards involve deliberate, immoral behavior
Morale hazards involve indifference & carelessness (think “ale” as the behavior one may exhibit after having multiple alcoholic drinks)

21. Hazard Morale hazard Physical hazard Moral hazard
Marge has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it off and leaves it in her car’s cupholder so she can put it back on in the morning on her way to work. Marge’s behavior would be a considered a:
Hazard
Morale hazard
Physical hazard
Moral hazard