Describe an example of "moral hazard" concerning insurance.

Moral hazard refers to the tendency of individuals to take on greater risks when they are insulated from the consequences, typically due to having insurance coverage. When a person knows that insurance will cover the costs of certain risks, they may act less cautiously. For instance, an insured individual might engage in reckless driving or fail to take necessary safety precautions, believing that any resulting damages will be compensated by their insurance policy. This behavior ultimately increases the likelihood of loss since the financial responsibility is shifted from the individual to the insurer.

In contrast, the other options describe scenarios that do not fit the definition of moral hazard. A describes an individual being cautious due to insurance, which is the opposite of moral hazard. C refers to insurer actions in response to fraud, and D mentions a potential consequence of changing premiums but does not relate directly to the behavior of an insured party when it comes to risk-taking. Thus, the selection highlighting an insured person taking on greater risks due to their insurance coverage effectively illustrates the concept of moral hazard.