Differentiating Anti Selection, Moral Hazard, Fraud

Discussion in 'SA3' started by wwatson, Jan 23, 2022.

  1. wwatson

    wwatson Keen member

    Hi, it may be a silly question, but I am confused about these three terms, is there a definite definition to each of them or they are not so clear cut?

    For example, if I am doing an online motor quote
    If I try many different times with many different answers to see which answers give me the lowest premium quote. Is this considered moral hazard?
    If I lie about where I park my car overnight, is this fraud? if most of the time I park my car on the street but occasionally park in a secure parking lot, and I gave answer as I park my car overnight in a secured parking lot, is this fraud or moral hazard?
    if I knew that I have a high chance to break my windscreen (maybe I will be driving in a plantation with many big lorries driving around) and I upgrade my policy to be a comprehensive cover, is this anti-selection? moral hazard?

    A bit confused...
     
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    Yes, there are definitions. See the Glossary for the first two, and a dictionary for the third! There's a little overlap in the first two as you'll see. If you search 'moral hazard' in these forums, you'll find a few dozen posts asking the same thing (mainly for CP1/CA1).
    In a concise nutshell though: Anti-selection is taking fair advantage of an insurer due to the way it charges differently (or not), moral hazard is acting differently knowing you're insured, and fraud is lying.
     
    wwatson likes this.
  3. wwatson

    wwatson Keen member

    Thanks Ian. The explanation makes sense to me. I did come across this from CP1. But recently saw one question from SA3 paper asking >5% on "explain anti-selection" and struggled to give 10 bullet points..
     

Share This Page