Moral hazard: Difference between revisions
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imported>Doug Williamson m (Broadened definition to reduced the specificity and used the orginal idefinition which was specific to insurance to explain the general definition see Investopedia for general points http://www.investopedia.com/terms/m/moralhazard.asp) |
imported>Doug Williamson (Expand. Source: The Treasurer, November 2015, p49.) |
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A tendency of managers take excessive risks knowing that their business will be saved by the authorities. | |||
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The tendency of some insured individuals or businesses to take excessive risks that they would not have taken if they had not been insured. | |||
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The risk that a party has not entered into a contract in good faith or provided misleading information. | The risk that a party has not entered into a contract in good faith or provided misleading information. | ||
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* [[Pension Protection Fund]] | * [[Pension Protection Fund]] | ||
[[Category:Manage_risks]] | |||
[[Category:Risk_frameworks]] | [[Category:Risk_frameworks]] | ||
Revision as of 21:34, 8 November 2015
1.
A tendency of managers take excessive risks knowing that their business will be saved by the authorities.
2.
The tendency of some insured individuals or businesses to take excessive risks that they would not have taken if they had not been insured.
3.
The risk that a party has not entered into a contract in good faith or provided misleading information.
For example an insured may attempt to take unfair advantage of an insurer or other guarantor by suppressing information relevant to the assessment of a risk or by not acting in accordance with the terms of a policy.
UK pensions legislation contains a number of clauses specifically designed to reduce the risk of moral hazard.
