Moral hazard occurs when one party gets involved in a risky event knowing that the deal is already done and the cost would be faced by the other party of the deal. Moral hazard is a result of asymmetric information and is usually related to the insurance market.

However this picture takes an interesting aspect of the health insurance market. Generally, public who tend to take health insurances, start using medical facilities to a much greater extent than what they previously did.  This is because now they know the insurance company will pay for the major chunk of the amount. This also makes it convenient for them because now they wouldn’t be very worried about the financial hit they would get if they fell severely sick because the insurance is their backbone.

However this could be taken in a negative way because now the people who’ve taken insurance, use medical facilities much more without paying for it, but this additional care is actually costly to produce. Hence this could be a disadvantage for the insurance company and is reflected by the cartoon. Because it says that now the “insurance only covers chuckles, snickers and giggles”. This shows how the insurance companies have to narrow down their policies too, so that the people cannot overuse or create a negative effect.

                                                                                                           Yasha Mehta