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Chapter 3: Regulation

D

Dar_Shan0209

Ton up Member
Hello,

I have a question:- Is a fraud equivalent to Moral Hazard?

In the CMP, Page 10 of Chapter 3 for Question (i) - ActEd notes state that the policyholder is lying and is more like a fraud rather than moral hazard while in the Online Classroom lying on the proposal form is an example of moral hazard. So, shouldn't be the answer be that yes for question (i)?
 
I'd say that some fraud can be classed as a moral hazard, but not certainly not all moral hazard is fraud.

Moral hazard is a change in behaviour towards a risk, knowing that the risk is insured against. So leaving a house door unlocked (when you have contents insurance) is moral hazard, but not fraud. If you then claimed the door was locked, that would be fraudulent.

In general, I'd treat them as distinct things, although I believe there are occasions where the two would overlap.
 
Hi Darshan
Thank you for your post. The course notes are correct re moral hazard and fraud being different, but unfortunately the OCR unit is not correct. We will update the unit and upload it onto the system, I'll put a message on the OCR forum when this has been done.

Thank you for pointing this out.

Helen
 
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