Analysis of the moral risk does not only mean assessing the Insured’s attitude to risk improvements or physical standards. It also includes what the client may do if he strikes financial difficulties or his behaviours when dealing with a claim.
Moral hazard can be one of the hardest aspects to judge. It’s also one of the most sensitive considerations you may be involved in.
In this area of moral risk assessment, the main factors to consider are:
Ø Is the business trading profitably?
Ø Is the business expanding, declining or failing?
Ø It may also be that the Insured could be the target of competitors or other persons with whom their business interests conflict (possibly including activist group). If there is an inkling that this is the case then the business is better avoided.
Ø Is there a known history of Criminal Activities by the Client or any of its Directors or Principal Officers?
Ø Is there a known history of involvement in a Bankruptcy, Liquidation or Receivership whether as an individual, sole trader, in a partnership or involved as a director or officer of a company or trust.
Ø Ask the question and understand why does the client wishes to move their account from the existing underwriter.
Summarized from many sources
IMAM MUSJAB – 08128079130