04. Hazards and Fraud

Question 1

Q: what are the four types of hazards?

Answer 1

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

Question 2

Moral Hazard

Answer 2

Involves reckless, deliberate behavior from the policyholder because of the financial security offered by insurance.

Question 3

Morale Hazard

Answer 3

When insured acts indifferently because of the comfort that insurance protection provides

Question 4

Physical Hazard

Answer 4

A physical condition that increases the chance of a loss

• environmental ( potholes in the road )
• material ( asbestos in the house )
• operational ( poorly maintained engine )
• occupational ( working in a coal mine )

Question 5

Legal Hazard

Answer 5

Increased chance of loss due to legal action

Question 6

Fraud

Answer 6

Deceiving an insurer to profit from an insurance policy

• hard fraud : deliberately planning or faking a loss
• soft “opportunistic” fraud : exaggerating a claim to inflate the indemnity