West Virginia Adjusters Practice Exam

Which of the following is considered a morale hazard?

1. Negligence due to indifference

2. Intentional damage

3. Poor maintenance of property

4. Fraudulent claims

The correct answer is: Negligence due to indifference

A morale hazard refers to a situation where an individual's behavior is affected by the knowledge that they are insured, which can lead to careless or indifferent actions regarding their own property or safety. In this context, negligence due to indifference is a classic example of a morale hazard. When individuals feel secure due to insurance coverage, they may take risks or neglect maintenance because they believe that any potential loss will be covered. The other choices reflect different types of hazards: intentional damage is more aligned with a moral hazard since it involves deliberate wrongdoing; poor maintenance of property can result from various factors and isn’t necessarily linked to the insured’s attitude towards their coverage; and fraudulent claims represent a dishonest act rather than an indifference or carelessness relating to the existence of insurance. In summary, negligence due to indifference points directly to the moral hazard concept, highlighting how insurance can lead some to lower their standards of care or responsibility.