Georgia Property & Casualty Practice Exam

Which type of hazard is characterized by an individual's indifferent attitude toward potential losses?

1. physical

2. moral

3. legal

4. morale

The correct answer is: morale

A hazard characterized by an individual's indifferent attitude toward potential losses is known as a morale hazard. This type of hazard arises when a person’s actions reflect a careless or indifferent approach to preventing loss. For example, someone who neglects to take precautions with their property because they have insurance coverage demonstrates a morale hazard; their attitude can lead to increased risk and potential for loss. Morale hazards are often linked to the awareness that a loss is covered by insurance, which may encourage risky behavior that the insured might otherwise avoid. This contrasts with the other types of hazards. Physical hazards are related to tangible conditions affecting risk, moral hazards are linked to dishonest behaviors or intentions, and legal hazards involve the regulations or laws that may increase the likelihood of a loss. Understanding these definitions and how attitudes influence risk is essential in risk management and insurance practices.