What does 'moral hazard' typically result from?

Moral hazard refers to a situation where one party is more likely to take risks because another party will bear the consequences of those risks. This concept arises primarily from individual behaviors and values, particularly when people are shielded from risk. For example, if someone has insurance coverage, they might engage in riskier behavior because they know the insurer will cover the losses, thus aligning with the definition of moral hazard.

This behavior stems from the values and decision-making processes of individuals, as they weigh their personal incentives against potential outcomes. The impact of individual attitudes towards risk and responsibility is what primarily defines moral hazard, making it a crucial concept in the fields of economics and insurance.

In contrast, external environmental changes, unintentional accidents, and health-related risks do not directly encapsulate the essence of moral hazard, as they either pertain to factors beyond an individual's control or do not involve the element of behavior-driven risk-taking.