Rhode Island Insurance Adjuster Exam 2026 – Complete Study Guide

Moral hazard refers to a situation in insurance where the behavior of an insured party is influenced by the fact that they are covered by insurance. Specifically, it describes the tendency of individuals to engage in riskier behavior or to take greater risks than they would if they were fully responsible for the consequences. When insured, individuals might feel more secure, leading them to act in a way that increases the likelihood of a loss occurring, such as being less careful with their property or decisions that could lead to claims. This behavioral aspect of insurance is critical for insurers to understand, as it can have a significant impact on the overall risk and costs associated with providing coverage.