1-G Types of Hazards & Fraud

Question 1

Moral Hazard

Answer 1

• Results from Policyholder’s deliberate decision
  -Involves reckless behavior because of the financial security offered by insurance.
  -Is a type of behavioral hazard

Question 2

Morale Hazard

Answer 2

• Takes place when insured acts differently because of the comfort that insurance protection provides
  -Another form of behavioral hazard

Moral VS Morale

-Moral involves deliberate immoral behavior
Morale hazards involve indifference and carelessness

Question 3

Physical Hazard

Answer 3

A physical condition that increases the chance of a loss

TYPES OF PH

Environmental- Potholes
Material- Asbestos in old house
Operational: Poorly maintained engine
Occupational: Working in a coal mine
hottubs & trampolines

Question 4

Legal Hazard

Answer 4

Increased chance of loss due to legal action
EX. Laws that force insurers to provide coverage for risks they would not normally cover.
-A legal system that favors those who file lawsuits for monetary gain.

Question 5

Fraud Definition

Answer 5

Deceiving an insurer to profit from an insurance policy

Question 6

Hard Fraud /Soft Fraud

Answer 6

H: Deliberately planning or faking a loss
S: Exaggerating a claim to inflate the indemnity