Planet Money Summer School cover image

Intro Econ 8: Risk & Disaster

Planet Money Summer School

NOTE

Insurance: Protecting Against Moral Hazard

Understanding correlated risk and adverse selection reveals essential insights about insurance policies. Certain risks, like bed bugs, are not covered due to their lower cost of management and the potential for moral hazard, where individuals might behave irresponsibly knowing they have insurance coverage. Companies avoid offering coverage for such risks to prevent people from taking reckless actions, emphasizing the importance of maintaining personal accountability even in the presence of insurance.

00:00
Transcript
Play full episode

Remember Everything You Learn from Podcasts

Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
App store bannerPlay store banner