Mississippi Property & Casualty Practice Exam

Which term describes a lack of concern that may affect an individual’s insurance risk?

1. Morale hazard

2. Physical hazard

3. Legal hazard

4. Psychological hazard

The correct answer is: Morale hazard

The term that describes a lack of concern which may impact an individual’s insurance risk is morale hazard. This concept refers to the attitude of an insured individual that influences their behavior regarding the risk of loss. When someone exhibits a carefree or negligent attitude towards their property or actions, they may inadvertently increase the likelihood of loss or damage. For instance, a person who does not take adequate care to secure their valuables might be more prone to theft or damage, thus raising the risk profile for their insurer. In contrast, physical hazards are concrete conditions related to the property itself, such as structural flaws or unsafe environments, while legal hazards involve conditions stemming from laws or regulations that could increase liability or potential losses. Psychological hazards, while relevant in some contexts, pertain more to mental states that could influence an individual's actions in a broader sense, rather than a specific lack of concern that leads to increased insurance risk.