What is "moral hazard" in the context of insurance?
A. A situation where a policyholder may take excessive risks because they know they are covered by insurance
B. A situation where the insurer underestimates the risk involved
C. A situation where the policyholder fails to make timely premium payments
D. A situation where insurance claims are delayed
Explanation:
Moral hazard refers to the risk that a policyholder may behave recklessly because they are covered by insurance, knowing that the insurer will bear the costs.