Morale Hazard

What Does Morale Hazard Mean?

A morale hazard refers to an unconscious change in behavior that increases the likelihood of the insurer covering a risk. This change in behavior can result from acquiring insurance for a particular asset.

Insuranceopedia Explains Morale Hazard

The key aspect of a morale hazard is its “unconscious” nature—any change in behavior occurs unintentionally.

For example, a person might drive more recklessly after insuring their car or handle their laptop less carefully if it’s covered by personal property insurance.

These subtle, unintended behavioral shifts are challenging for underwriters to evaluate, making it difficult to account for morale hazards in risk assessments.