1-G - Types of Hazards and Fraud

Define "Hazard"

An instance, behavior or condition that increases the chance of incurring a loss or increases the severity of a loss.

The 3 types of Hazards

Moral, Morale and Physical

Define "Fraud"

Deceiving an insurer to profit from an insurance policy (moral hazard).

The 2 types of Fraud

1)Hard - Deliberately planning or faking a loss. 2)Soft - Opportunistic. Exaggerating a claim to inflate the indemnity.

Explain Moral, Morale and Physical Hazards with examples.

1)Moral - An insured person acting in a consciously acts in a way that is more likely to result in a loss. ie. leaves car in an unsafe neighborhood, unlocked with keys in the ignition, hoping that it will be stolen to collect on insurance. 2)Morale - Insured unconsciously exibits riskier behavior usually because one is assured with the comfort of having insurance. Having no insurance would make one more careful, because of being totally responsible for the item. ie. car Klutzy and forgetful people are also a morale hazard. 3)Physical - Environmental - potholes Material - asbestos Occupational - working in a coal mine