insurance moral hazard prevention adaptation incentives

Insurance can weaken incentives to avoid hazards

When policyholders transfer financial risk to an insurer, they may become less worried about the risk themselves. That can weaken their incentive to prevent hazards or adapt to them—a problem known as moral hazard.

New Caledonian crows manufacture tools instead of merely finding them

New Caledonian crows do more than pick up convenient sticks. They cut and shape plant material into tools that help extract insects from crevices, and some make hooked tools that improve their grip on prey. Tool designs can vary between populations. Their behavior shows that sophisticated tool manufacture is not exclusive to humans or other primates.

A safer refrigerant helped refrigerators become household appliances

Early mechanical refrigerators often used refrigerants that were toxic or flammable. Chlorofluorocarbon refrigerants such as Freon, introduced around 1930, made domestic refrigeration easier to commercialize because they were less immediately hazardous in ordinary use. Decades later, scientists discovered that these chemicals damaged the ozone layer, turning an apparent safety breakthrough into an environmental problem.

Like this? There’s a whole feed of it. Replace empty scrolling with things worth knowing.

Download Hence for free

insurance moral hazard prevention adaptation incentives

Insurance can weaken incentives to avoid hazards

Keep exploring