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Definition

This is a term from the insurance industry which refers to the situation where an insured person may take greater than normal risks because they know that they are insured against the consequences. So, for example, people with a comprehensive medical policy aid may take less care of their health than those who, because they have no medical aid, take better care of their health. The bail-out of Eskom by the Government Employees Pension Fund (GEPF) and the Public Investment Corporation (PIC) which was suggested by Cosatu (February 2020) and considered by government carries the moral hazard that, if it was implemented, it would give other badly-run and corrupt state-owned enterprises a "get-out-of-jail" free card if they were also mired in debt through corruption and mismanagement. In effect, it would encourage SOE's to engage in these negative activities because they would probably be protected from their consequences by this type of mechanism.

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