Which of the following is an example of a moral hazard?

• A. Alcoholism
• B. Slippery floor
• C. Regulated business practices
• D. Good credit history

Answer: (A)

Moral hazard is the tendency for insured individuals to take more risks or behave differently because they have insurance, which can lead to more or larger losses. Alcoholism fits this concept because it’s a behavioral pattern that increases the chance of losses (such as accidents, injuries, or health costs) and can be difficult to curb when outcomes are partially covered by insurance. The presence of insurance can lessen the perceived cost of risky behavior, changing incentives in a way that raises the likelihood or severity of a loss.

The other options describe conditions or factors that influence risk but don’t illustrate a change in behavior caused by insurance. A slippery floor is a physical hazard—an unsafe condition that exists regardless of coverage. Regulated business practices concern compliance and risk management, not a behavior change driven by insurance. Good credit history signals lower risk, not a risk-increasing behavior.