Moral hazard arises when an individual's behavior changes as a result of having insurance coverage. In this context, “B” is the correct choice because it highlights a scenario where an insured person takes on additional risks that they may not have considered or undertaken without the protection offered by their insurance policy.
For example, if an individual has car insurance, they might drive less cautiously knowing that any potential damages would be covered by their policy. This behavior reflects a shift in attitude because the insured feels insulated from the consequences of risky actions, which can lead to higher costs for the insurer.
The other situations outlined do not illustrate moral hazard effectively. In the case of not filing any claims, the insured behaves responsibly and takes no advantage of their coverage. Underreporting valuables may relate more to fraud rather than moral hazard, which is about risk-taking behavior. Lastly, facing financial difficulties may lead to different behaviors, such as cutting insurance coverage, but it does not directly create a situation where the insured feels incentivized to increase risky behavior because of their coverage. Overall, moral hazard directly links to the propensity to take risks due to the safety net provided by insurance, making option “B” the best reflection of this concept.