What does 'moral hazard' refer to in insurance?

Moral hazard refers to the situation where an insured person is more likely to take risks because they are covered by insurance. When individuals know they have financial protection against certain risks, they may engage in riskier behavior than they would if they were not insured. This is particularly relevant in the insurance context because it can lead to increased claims and losses for insurers, undermining the principle of insurance that seeks to spread risk evenly among policyholders.

In the context of the other options, while natural disasters, financial market risks, and the stability of businesses are all relevant considerations within the broader insurance field, they do not define moral hazard. Instead, moral hazard specifically addresses the relationship between the insured's behavior and their insurance coverage. Thus, the focus on individuals potentially engaging in riskier behavior due to insurance coverage is what makes this option a clear embodiment of the concept of moral hazard in insurance.