moral hazard

American  

noun

1. Insurance.  an insurance company's risk as to the insured's trustworthiness and honesty.

2. the risk that an individual or organization will act irresponsibly or recklessly if protected or exempt from the consequences of an action.

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moral hazard British  

noun

1. insurance a risk incurred by an insurance company with respect to the possible lack of honesty or prudence among policyholders

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Etymology

Origin of moral hazard

First recorded in 1915–20

Example Sentences

The F.D.I.C. expressed concerns that broadly expanding deposit insurance could create “moral hazard” problems, that is, banks would be shielded from the consequences of making risky investments.

From New York Times

Political backlash followed, with Republicans opposing universal deposit guarantees on the basis such tools encourage moral hazard.

From Reuters

"If we need to step in again, we will - as we always do - have an eye to mitigating moral hazard," Gravelle said.

From Reuters

Mr. McHenry warned that proposed increases to the Federal Deposit Insurance Corporation deposit insurance limit could lead to unintended consequences and “moral hazard,” and said that “firms need to be able to fail.”

From New York Times

“It’s going to create huge moral hazard problems in the sector,” he said.

From New York Times