The Morale Hazard
The “morale hazard” is the increase in uncertainty brought about by the indifference of a policyholder. Because of this indifference the policyholder may neglect ordinary precautions to protect against loss. The result is an increase in the probability of loss or an increase in the severity of loss. In many cases the difference between “moral hazard” and “morale hazard” may be only one of degree. If the property owner takes steps to destroy his or her own property, it is a “moral hazard.” If the property owner fails to take steps that would help to protect against a loss, that is a “morale hazard.” The “morale hazard” is usually not considered as dangerous as the “moral hazard.”
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