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

Because the lenders sold many—though not all—of the loans they made to other investors, in the form of mortgage bonds, the industry was also fraught with moral hazard.

From Literature

We will get more moral hazard and less economic dynamism.

From The Wall Street Journal

Call it moral hazard, or simply the moral imagination.

From Salon

These are at best irrelevant — more likely, a moral hazard.

From Salon

Clear legal separation from government backing is essential to prevent moral hazard.

From Los Angeles Times