An insurance company must be concerned about the possibility that someone will buy fire insurance on a building and then set fire to it.This is an example of moral hazard.

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Reymond Jomar · Accepted Answer

Final Answer : True, Explanation :  Moral hazard refers to the increased risk-taking behavior of an insured party that occurs when the insurer reduces its exposure to loss, for example, by reducing the deductible or increasing coverage limits. In the case of fire insurance, the insured party may be more likely to set fire to the building if they know they can collect a payout from their insurance policy.

An insurance company must be concerned about the possibility that someone will buy fire insurance on a building and then set fire to it.This is an example of moral hazard.

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