moral hazard

Definition

The risk that the presence of a contract will affect on the behavior of one or more parties. The classic example is in the insurance industry, where coverage against a loss might increase the risk-taking behavior of the insured.

Use moral hazard in a sentence

You need to try and make sure that there is not a moral hazard that stands in the way of closing a deal.

​ Was this Helpful? YES  NO 25 out of 25 people found this helpful.

The executive officer of the company started base jumping after the new insurance contract was signed in spite of the moral hazard clause.

​ Was this Helpful? YES  NO 25 out of 25 people found this helpful.

Many people criticized the federal government's decision to provide bailouts to banks with risky mortgage lending practices as creating a moral hazard that would continue to encourage these practices.

​ Was this Helpful? YES  NO 25 out of 25 people found this helpful.

Show more usage examples...

Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
moral character moral obligation bond