[amp_mcq option1=”When the age is advanced” option2=”Large sum insured disproportionate to income” option3=”Both A & B” option4=”None of the three” correct=”option3″]<\/p>\n
The correct answer is: C. Both A & B.<\/p>\n
Moral hazard is a situation in which a person’s behavior changes when they are insured against a particular risk. For example, a person who is insured against fire may be more likely to leave their stove on unattended, or a person who is insured against theft may be more likely to leave their valuables out in the open.<\/p>\n
In the case of advanced age, there is a greater risk of death or illness, which would lead to a larger payout from the insurance company. This could lead to moral hazard, as the insured person may be more likely to take risks that could lead to their death or illness.<\/p>\n
In the case of a large sum insured disproportionate to income, there is a greater incentive for the insured person to make a claim, even if they do not have a legitimate claim. This could also lead to moral hazard, as the insured person may be more likely to exaggerate or fabricate a claim.<\/p>\n
It is important to note that moral hazard is not always a bad thing. In some cases, it can lead to people taking more risks, which can lead to innovation and progress. However, it is important to be aware of the potential for moral hazard when designing insurance policies.<\/p>\n
Here are some additional details about each option:<\/p>\n
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