Social insurance faces high risk of moral hazard, causing widespread losses.
Moral hazard in social insurance happens when people take advantage of the system, causing harm to others and society. This often occurs when individuals buy insurance and try to maximize their benefits while minimizing their own risks. The behavior of those insured can lead to significant losses and challenges in monitoring and preventing such actions. To address this issue, it is important to limit moral hazard in social insurance by improving social structures and responses to prevent abuse of the system.