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

See Examples For:

moral hazard

Critics argue that the Fed Put creates moral hazard, as investors grow to expect the Fed to step in and so take risks they would otherwise be unwilling to take.

From The Wall Street Journal ● Jun. 23, 2026

Call it moral hazard, or simply the moral imagination.

From Salon ● Jul. 29, 2025

"They clearly want to sort out the property sector and make sure moral hazard doesn't encroach into the system, but I have been surprised by how seemingly weak the policy easing has been thus far."

From Reuters ● Sep. 5, 2023

A bailout will preserve services and the ability to borrow money, but create an expectation of help for peer governments—a classic moral hazard.

From Slate ● Jun. 5, 2023

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 "The Big Short" by Michael Lewis