Final answer:
Inducing a policyholder to switch insurance companies without regard to bad consequences is an example of moral hazard in the insurance industry.
Step-by-step explanation:
Inducing a policyholder to switch insurance companies without regard to bad consequences is an example of moral hazard in the insurance industry. Moral hazard refers to the situation when people engage in riskier behavior with insurance than they would without it. When insurance companies try to attract policyholders by offering better deals or incentives to switch, they may encourage policyholders to take on more risk, knowing that they will be protected by the insurance. However, this can lead to higher costs for the insurance company and potentially cause financial losses. To mitigate moral hazard, insurance companies often use risk-based pricing, where policies are priced based on the expected risk of the insured.