Insurance 101 – Chapter 3 – Volume 8 – Underwriting Against Moral Hazards

Underwriting Against Moral Hazards

Policy provisions can be used to control the risk of the moral hazard, without refusing the risk in its entirety. Built-in provisions of the policies like the “fraud and  misrepresentation” conditions work to deter losses by persons with a moral hazard. The standard fire policy, and most first party policies, provide that the entire policy is void if the applicant commits fraud in securing the insurance or if the insured willfully  misrepresents or conceals any material fact or circumstance concerning insurance. If the policy is a marine policy the insured is required to volunteer material information. With other types of insurance the onus is on the insurer to ask the right questions. Failure to ask can compel an insurer to stay on a risk it would never have taken if it knew the truth.

The following video was adapted from my book, “Insurance Claims A Comprehensive Guide” Published by the National Underwriter Company and is available at the Zalma Insurance Claims Library

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The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.


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