Which of the following actions is likely to reduce the morale hazard associated with property insurance?

To understand why implementing stringent security measures is likely to reduce the morale hazard associated with property insurance, it’s essential to first define what a morale hazard is. A morale hazard arises from an insured party's indifferent attitude toward risk. It can occur when a person or entity feels insulated from loss due to having insurance coverage, leading to carelessness in taking preventive measures against losses.

Implementing stringent security measures directly addresses this concern by creating a physical deterrent against loss. When property owners know that they have robust security systems in place—such as alarms, surveillance cameras, or controlled access points—they are encouraged to take the risk of loss more seriously. This makes them less likely to engage in careless behavior, thereby reducing the moral hazard.

Additionally, having security measures can also send a strong message that the insured party is committed to protecting their property, which could foster a mentality of responsibility and alertness regarding potential risks and losses. This attitude shift can lead to safer practices that ultimately lower the likelihood of claims and losses.

In contrast, options such as encouraging regular inspections, auditing claim history, and offering discounts for good safety records focus more on monitoring and rewarding behavior after risk has been assessed, rather than actively preventing the careless mindset that defines morale hazards. While these