Insurance Broker Certification Practice Exam

Which of the following is considered a morale hazard?

1. Cautious driving

2. Insured loss via natural disaster

3. Reckless driving

4. Negligence due to lack of awareness

The correct answer is: Reckless driving

A morale hazard refers to a situation where an individual’s attitude or behavior increases the likelihood of a loss occurring, typically stemming from a sense of indifference or carelessness regarding their property or well-being. Reckless driving embodies this concept as it reflects a disregard for safety and potential consequences. When a person engages in reckless driving, they may not fully appreciate the risks involved, which could lead to accidents or damage, thus increasing the likelihood of a claim being made. In contrast, cautious driving demonstrates responsible behavior, which actively seeks to minimize risk and prevent accidents. The insured loss via natural disaster is an unpredictable event and does not relate to the moral disposition of the insured. Negligence due to lack of awareness, while it can lead to loss, does not capture the broader attitude of indifference or recklessness that characterizes a morale hazard. Thus, reckless driving is the quintessential example of a morale hazard due to its inherent risk-taking and lack of concern for safety.