What concern might an underwriter have regarding an applicant's prior claims history?

An underwriter would be particularly concerned about a moral hazard when evaluating an applicant's prior claims history. A moral hazard refers to the possibility that a policyholder may engage in risky behavior or act recklessly, knowing they are protected by insurance. If an applicant has a history of claims, an underwriter may view this as an indicator of a potential tendency to take unnecessary risks or to not act with due diligence in protecting their property or the insured interest.

For instance, if an applicant has repeatedly filed claims for damage that appears to stem from negligence or careless behavior, the underwriter may conclude that the applicant does not take adequate precautions to prevent losses. This could suggest a higher risk level for the insurer, which could lead to higher premiums or denial of coverage altogether.

In contrast, concerns related to insurable interests, physical hazards, and specific risks associated with smoking materials, while relevant to underwriting, do not directly relate to the behavioral implications inherent in a moral hazard. These concerns focus more on the specifics of the insured property or the nature of risks rather than the potential attitudes and behaviors of the applicant that could lead to increased claims.