Contents

Key Takeaways:

  • Excesses exist to discourage unnecessary claims - you pay a portion out of pocket, which keeps you cautious
  • Insurers reward good behaviour with no-claims discounts and penalise reckless acts through policy exclusions
  • Be upfront and honest with your broker about your situation so they can find cover that fits
  • Maintain good habits like securing your property and driving safely to reduce your risk profile and keep premiums affordable

Managing Moral Hazard

Insurers are well aware of moral hazard and have ways to keep it in check. Here are some common strategies:

  1. Excess (Deductibles): When you make a claim, you often pay out-of-pocket an excess or a portion of the cost. This encourages you to avoid unnecessary claims and stay cautious.

  2. Policy Conditions: Insurers set rules (e.g., requiring you to install a security system for Home Insurance or maintain your vehicle for Motor Vehicle Insurance) to reduce risky behaviour.

  3. Premium Discounts: Many insurers offer discounts for no-claims records or safe practices, rewarding you for being careful.

  4. Exclusions: Policies often exclude coverage for reckless or intentional acts, ensuring you can’t rely on insurance to bail you out of avoidable situations.

What Can You Do About Moral Hazard?

Steps policyholders can take to manage moral hazard

You can take steps to manage moral hazard and keep your premiums affordable, including:

  1. Be Honest with Your Insurance Broker: When your broker’s helping you find a policy, share accurate details about your situation. This helps your broker tailor coverage that fits your needs without encouraging risky behaviour.

  2. Understand Your Policy: Know what’s covered and what’s not. This helps you avoid relying too heavily on insurance and keeps you mindful of your responsibilities.

  3. Maintain Good Habits: Whether it’s locking your home, driving safely or keeping your workplace secure, staying proactive reduces risks and claims.

  4. Work with a Broker: Insurance brokers can help you find the right fit and guide you to policies that balance cost and coverage while keeping moral hazard in mind.

Here at Tank Insurance, we’re committed to helping you find policies that manage moral hazard effectively, ensuring fair coverage and responsible behavior.

Get in touch with us today to discuss your insurance needs and secure the right policy for you!

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