Which scenario best exemplifies moral hazard?

Moral hazard refers to a situation where one party engages in risky behavior because they are insulated from the consequences, often due to some form of insurance coverage or protection. In the context of the scenario provided, submitting fraudulent claims for insurance represents moral hazard perfectly. When an individual commits fraud, they take advantage of their insurance policy knowing that they might not have to bear the full consequences of their actions. The insurance company bears the financial burden of the fraudulent claim, which encourages the person to act recklessly.

The other scenarios highlight different aspects of risk and behavior that do not fit the definition of moral hazard. Eating unhealthy food despite being sick reflects a choice that might lead to health issues but does not involve the concept of being insulated from consequences due to insurance. Driving carelessly on a rainy day involves taking risks without the context of insurance coverage affecting behavior. Neglecting to secure property against theft pertains to a lack of preventative measures but does not illustrate the moral hazard concept where adverse actions are taken because of insurance protection.