Moral hazard is the notion that an insured will engage in more risky behavior than would be the case in the absence of insurance. Deductibles and co-insurance features cause the insured to participate in at least a portion of losses incurred by the firm. An insurance policy with a deductible does not cover losses below the deductible amount. A policy with a co-insurance feature does not cover losses above the co-insurance limit. Diversification and reinsurance are techniques insurance companies use to manage other risks. | 
