Which term describes loss due to government interference?

The correct term that describes loss due to government interference is moral hazard. Moral hazard refers to situations where a party is more likely to take risks because they do not have to bear the full consequences of those risks. In the context of government interference, it can arise when government actions, such as regulations or laws, affect the behavior of individuals or businesses in a way that leads to increased risk-taking or detrimental decisions.

In this scenario, moral hazard encapsulates the idea that individuals or entities may engage in riskier behavior knowing they are shielded from certain negative impacts, often due to government policies, insurance, or other safety nets. For instance, if a government provides bailouts or financial assistance, it may lead businesses to take risks that they would not normally undertake if they bore the full risk of loss.

The other terms do not align with the concept of loss due to government interference. Physical hazard pertains to tangible conditions that increase the chance of a loss occurring, while pro rata liability relates to the proportional sharing of loss among multiple insurers. A subrogation clause involves the right of an insurer to take legal action against a third party responsible for a loss after they have paid the claim, which does not directly relate to government interference.