[amp_mcq option1=”A Bank manager with moderate occasional consumption of alcohol” option2=”A race goer with betting habits and usually a heavy consumer of alcohol” option3=”A university professor asking for a large cover on his life” option4=”Where in a proposal the nominee is a near dependant of the proposer” correct=”option2″]<\/p>\n
The correct answer is: B. A race goer with betting habits and usually a heavy consumer of alcohol<\/strong><\/p>\n Moral hazard is a situation where one party’s actions change to the detriment of another party when the costs of those actions are not borne by the party taking them. In this case, the race goer is more likely to take risks, such as betting on horses, because they know that if they lose, they will not be the ones to suffer the consequences. The insurance company is therefore taking on a greater risk by insuring this person.<\/p>\n The other options do not present a situation of moral hazard. A bank manager with moderate occasional consumption of alcohol is not likely to take risks that would jeopardize their job or the bank’s finances. A university professor asking for a large cover on their life is not likely to take risks that would increase the likelihood of their death. And where in a proposal the nominee is a near dependant of the proposer, there is no reason to believe that the nominee would take risks that would jeopardize the proposer’s financial security.<\/p>\n Moral hazard is a common problem in insurance, and it is important for insurers to be aware of it in order to manage their risks effectively.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”A Bank manager with moderate occasional consumption of alcohol” option2=”A race goer with betting habits and usually a heavy consumer of alcohol” option3=”A university professor asking for a large cover on his life” option4=”Where in a proposal the nominee is a near dependant of the proposer” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[261],"tags":[],"class_list":["post-32422","post","type-post","status-publish","format-standard","hentry","category-insurance","no-featured-image-padding"],"yoast_head":"\n