UK: a factor arising from the character or circumstances of the policy holder, including carelessness or the nature of the business, which may increase the risk assumed by the insurer.
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A hazard that is caused by the morals or attitude of an insured. For example, an insured who is not morally opposed to feigning an illness to file fraudulent medical expense claims.
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As physical hazard relates to susceptibility to fire or wind, the term moral hazard relates to susceptibility to loss through moral lapse of the owner (e.g., burn the house down and collect from the insurance company before losing it in a foreclosure to the finance company).
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UK: Character, habits and actions of insureds and others (e.g. employees, associates) that influence the possibility and extent of a loss. Carelessness, unreliability, poor lifestyle, dishonesty are the unfavourable characteristics that insurers guard against or avoid. Compare with physical hazard.
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Hazard arising from personal characteristics, such as the habits, methods of management, financial standing, mental, condition, or lack of integrity of an insured who may intentionally cause, or hope for, a loss. For example, embezzlement or arson are moral hazards.
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Those personal characteristics of a prospective insured or its employees or associates that may increase the probability or size of an insurance loss.