Which statement about moral hazards is false?

The assertion that moral hazards are based on conscious decisions is not accurate. Moral hazards primarily involve changes in behavior that result from having insurance coverage, which can lead to increased risk-taking. While there can be an intentional element to some behaviors associated with moral hazards, they often manifest in less overt ways, driven by a belief that one is insulated from the consequences of risky actions due to insurance protection.

For instance, an individual might engage in riskier behavior, like driving more recklessly, because they believe any potential damages will be covered by their insurance. This shift in behavior does not always stem from a fully conscious, deliberate decision; it can instead be a subconscious adjustment to the safety net provided by insurance, leading to an overall increase in risk.

The other statements about moral hazards are generally true. They are indeed caused by human behavior, which illustrates how an insured party might alter their actions based on their understanding of being covered. Additionally, moral hazards inherently increase risk as individuals might take greater risks when they feel protected by insurance. In some cases, moral hazards can arise from behaviors perceived as reckless due to the false sense of security provided by insurance.