What is the term for creating a loss situation to collect from an insurance company?

The correct term for creating a loss situation to collect from an insurance company is moral hazard. This concept refers to the increased risk of loss that occurs when an individual is insulated from the consequences of their actions, typically because they have insurance. In this scenario, a person might intentionally create a loss or exaggerate a legitimate claim to benefit financially from their insurance coverage.

Moral hazard occurs when the safety net provided by insurance can lead to reckless behavior, as individuals may take more risks knowing they are protected from the financial repercussions. This is a significant concern in the insurance industry, as it can lead to increased claims and higher costs for insurers.

While fraudulent claims do involve deceit in seeking insurance benefits, they do not specifically encompass the broader behavior represented by moral hazard, which includes both legitimate exploitation and outright deception. The other terms, physical hazard and legal hazard, refer to different types of risks that can affect insurance underwriting and claims but do not capture the concept of intentionally creating a loss situation for financial gain.