moral hazardmoral hazard
- The risk to an insurance company that the holder of a policy will destroy the insured property in order to collect the monetary reimbursement available under the policy.
- The risk that an individual or organization will behave recklessly or immorally when protected from the consequences.
(usually uncountable, plural moral hazards)
- (economics, insurance) The prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.
moral hazard - Investment & Finance Definition
A dilemma that arises when government officials take steps to bail out countries or businesses that are in serious financial trouble. Although the action may help prevent widespread financial turmoil, thereby protecting innocent parties, it creates an expectation that governments will always come to the aid of failing countries and companies, potentially increasing risky behavior because there is no penalty.