If Sally drives less carefully after buying auto insuarnce, she illustrates

If Sally drives less carefully after buying auto insuarnce, she illustrates

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Answer

• moral hazard.
  Explanation:
  When a party gets involved in risky activities so as to gain compensation or profit before the contract settles, this is described as moral hazard. When Sally gets an insurance, she drives less carefully because she knows that in case of accident or damage, the insurance cover will compensate for the damages and probably get profit out of the incident.