1-G Types Of Hazards & Fraud

Question 1

Hazards

Answer 1

Increase risk for the insurer

Question 2

4 Types of Hazards

Answer 2

1. ) Moral Hazard
2. ) Morale Hazard
3. ) Physical Hazard
4. ) Legal Hazard

Question 3

Moral Hazard

Answer 3

Results from the policy holder’s deliberate decision; reckless behavior because of financial security; “behavioral hazard”
Example: leaving keys in car

Question 4

Morale Hazard

Answer 4

When insured acts differently because of confit that insurance protection provides; “behavioral hazard”

Question 5

Moral vs. Morale

Answer 5

• Moral = deliberate, immoral behavior

- Morale = indifference/carelessness

Question 6

Physical Hazard

Answer 6

A condition that increases the chance of a loss

Question 7

What are the types of physical hazards?

Answer 7

• environmental; potholes
• material; asbestos in a house
• operational; not getting brakes changed
• occupational; working in a coal mine

Question 8

Legal Hazard

Answer 8

Increased chance of Loss due to legal action (being sued)
Example:
- laws that force insurer to provide coverage for risks they wouldn’t normally cover
- a Legal system that favors those who file suits for monetary gain

Question 9

Fraud

Answer 9

Deceiving an insurer to profit from an insurance policy

Question 10

2 Types of Fraud

Answer 10

1. ) Hard

2. ) Soft

Question 11

Hard Fraud

Answer 11

Deliberately planning/taking a loss

Question 12

Soft Fraud

Answer 12

Exaggerating a claim to inflate indemnity