Category Archive: moral hazard


Moral hazard: bonuses, seat belts and condoms

(If experiencing problems with IE7, please try Firefox, Opera or Safari) “Moral hazard” is a term that dates back to the 1600s. Until recent times its use has been mostly confined to the insurance industry to refer to behaviour that responds to changes in perceived risk. The industry has noticed that people who have contents …

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Are we doomed to live in an oppressive safety culture?

Martin Parkinson raises an interesting question (comment on previous post): what should be the reaction to an accident that, a priori, was an extremely low probability event? He suggests that “any attempt to reverse the counterproductive aspects of ‘health and safety culture’ is doomed to failure”. After an accident he argues that most people will …

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Moral Hazard

“Moral hazard” is a term used in the insurance industry to refer to the way in which behaviour alters when people acquire insurance. People with house contents insurance are less careful about locking up. Such behaviour in the eyes of insurers is “immoral”. The term stigmatizes human nature. We all adjust our behaviour in response …

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