Which type of fraud involves deliberately planning or faking a loss?

Hard fraud is characterized by the deliberate planning or staging of a loss with the intent to deceive an insurance company. This type of fraud typically involves actions such as setting up a fake accident, causing a deliberate fire, or falsely claiming an item was stolen. The key aspect of hard fraud is that it requires significant forethought and intentionality; the perpetrator exhibits a clear motive to gain a financial benefit by violating insurance contract terms.

In the context of this question, hard fraud is the most accurate choice because it directly addresses the concept of intentionally creating a loss. Other types of fraud, such as soft fraud, generally involve exaggeration of genuine claims rather than outright fabrication. Morale hazard refers to a situation where the behavior of an insured person changes due to the existence of insurance, while physical hazard relates to tangible conditions that increase the likelihood of a loss. These concepts do not encompass the deliberate planning or staging of a fraudulent loss, thus reinforcing why hard fraud is the correct answer.