You lower the deductible on your car insurance and start driving like michael schumacher (a retired formula one race car driver). This is an example of moral hazard.
A moral hazard occurs when one party in a transaction has the opportunity to assume additional risks that negatively affect the other party. The decision is based not on what is considered right, but what provides the highest level of benefit, hence the reference to morality. It can be divided into two types when it involves asymmetric information (or lack of verifiability) of the outcome of a random event. An ex ante moral hazard is a change in behavior prior to the outcome of the random event, whereas ex post involves behavior after the outcome.
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