What term describes the tendency towards increased risk due to lie or fraud?

The correct term that describes the tendency towards increased risk due to lie or fraud is moral hazard. This concept refers to situations where one party is more likely to take risks because they do not bear the full consequences of those risks. In the context of insurance and finance, moral hazard arises when individuals or organizations are incentivized to act less cautiously because they are insulated from the negative outcomes, often due to coverage or safety net provided by insurance.

In cases of lie or fraud, individuals may be more inclined to deceive the insurer or misrepresent their situation, leading to a higher likelihood of claims or losses than would occur in a fully transparent and honest scenario. Therefore, the presence of moral hazard in an insurance context can significantly affect the overall risk profile and can result in increased costs for insurers as they have to manage these higher risks appropriately.

Other terms like legal hazard refer to the risk that arises from changes in the legal environment that affect the cost or outcomes of an insurance or other financial transaction. Exposure pertains to the potential for loss, often due to an insurable interest, while homogeneous generally refers to a state where items or risks are similar in nature and characteristics, which does not pertain to the behavior regarding lies or fraud.