Moral Hazard

Pronunciation: /ˈmɔrəl ˈhæzərd/

Definitions of moral hazard

noun Moral hazard is a term used in economics and finance to describe the risk that one party may act in a way that is not in the best interest of another party because the first party does not bear the full consequences of their actions.

Example Sentences

A1 I heard the term 'moral hazard' in my economics class.

A2 The insurance company is concerned about the potential moral hazard of offering full coverage.

B1 Banks need to be aware of moral hazard when lending money to customers.

B2 Government bailouts can create moral hazard by encouraging risky behavior in the future.

C1 Financial regulators must take steps to mitigate moral hazard in the banking sector.

C2 The CEO's decision to take excessive risks showed a blatant disregard for moral hazard principles.

Examples of moral hazard in a Sentence

formal The presence of moral hazard in the insurance industry can lead to increased fraudulent claims.

informal When people know they're protected by insurance, they might take more risks - that's moral hazard.

slang If you're always bailing out your friend, you're just enabling their moral hazard.

figurative Ignoring the warning signs of moral hazard is like playing with fire in a dry forest.

Grammatical Forms of moral hazard

• plural: moral hazards
• comparative: more moral hazard
• superlative: most moral hazard
• present tense: moral hazard
• future tense: will experience moral hazard
• perfect tense: has experienced moral hazard
• continuous tense: is experiencing moral hazard
• singular: moral hazard
• positive degree: moral hazard
• infinitive: to cause moral hazard
• gerund: experiencing moral hazard
• participle: experienced moral hazard

Origin and Evolution of moral hazard

First Known Use: 1853 year

Language of Origin: English

Story behind the word: The term 'moral hazard' originated in the insurance industry in the 19th century.

Evolution of the word: Originally used in the context of insurance to refer to the risk that a party may act in a risky manner because they are protected from the consequences, the term has since evolved to encompass a broader range of situations where individuals or entities may take risks because they do not bear the full consequences of their actions.