Insurance creates a moral hazard in many situations because

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    insured individuals do not have to bear the cost of reckless or unsafe behavior and so engage in riskier behavior than they otherwise would.
     insured individuals pay the cost of insurance premiums while those who engage in riskier behavior often avoid the cost of premiums.
     the insurance premiums are not high enough to cover the cost of any damage insured individuals may cause.
     uninsured individuals avoid taking or paying for precautionary steps that can limit losses.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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insured individuals do not have to bear the cost of reckless or unsafe behavior and so engage in riskier behavior than they otherwise would.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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