This website uses cookies to ensure you have the best experience. Learn more

Risk And Insurance Essay

961 words - 4 pages

Sthephanie RivasFIN 15102/13/2014INSURANCE AND RISKExplain each of the following characteristics of a typical insurance plan.Pooling of losses: "pooling is the spreading of losses incurred by the few over the entire group, so that in the process, average loss is substituted for actual loss" This principle connote that a different persons exposed to similar risks come together and make contributions towards a pool of funds. If a person from the group actually suffers a loss on account of such risk, he receives compensation from the same pool of funds. The advantage on the pooling of losses is that, the risk of few people is spread over a larger group of people, all of whom are exposed to the similar risk and since the number of insured individuals is larger, insurance companies use statistical tools such as standard deviation to project their actual loss within a given class. Not all the insured individuals will suffer losses at the same time and also is probable that some of the individuals on the group will not suffer loss at all.Payment Of Fortuitous Losses means that the peril occurs as a result of chance or is unexpected or accidental. No one should be able to make the risk happen. Example if a person set fire to his house intentionally and asks the insurance company to compensate for the loss. This would be taking unfair advantage of an arrangement.Risk Transfer is when we transfer the pure risk to a third party on the majority of the cases to insurers. Example homeowners transfer the risk of destruction when the acquire homeowners insured.Indemnification means restoring the insured in the estimated financial position, as he/she was in prior the occurrence of the loss. The amount amount paid out, as a claim by the insurance company in no case should exceed the amount of loss incurred.Explain the law of larger number.Is a principle of probability according to which the frequencies of events with the same likelihood occurrence even out, given enough trials. As the number of experiments increases, the actual ratio of outcome will converge on the expected ratio of outcomes.Pure insurance risk ideally should have certain characteristics of an ideally insurable risk.Large Number of Exposure Units.Accidental and Unintentional Loss.Determinable and Measurable Loss.No catastrophic Loss.Calculable chance of loss.Economically Feasible Premium.Identify the approaches that insures can use to deal with the problem of catastrophic loss of exposures.Insurers have different techniques or approaches that can be use to manage the problem of catastrophic loss of exposures; they can use financial instruments such as catastrophe bonds, also they can divide the coverage of risk in a bigger geographical area and on this way reduce their losses; Another instrument is to reinsurance doing so insures will transfer the risk to a second insurer and on this way reducing the loss.Why are most Market risks, financial risk, production risk, and political risk considered...

Find Another Essay On Risk and Insurance

Insurance - The need of the hour

1695 words - 7 pages for the risk exposure in insuring property/person.History of Insurance:-To proceed to details of the insurance we have to look back into history. The concept of insurance was started in 3000 B.C in China. The Chinese merchants, wanted to make some profit from their goods that they shipped overseas. In the event of ship being pirated or lost the insuring partner would pay the loss of the ship owner and owner of the goods. In turn the merchant is

distinguish between general insurance and life insurance

724 words - 3 pages insurance under Miscellaneous Insurance of General Insurance. General Insurance has many different kinds of coverages so talk to a reliable agent before we take a policy out. General insurance can transfers risk away from us to an insurer for personal matters other than life insurance. For example, casualty and property insurance, transfers the risk of damage to our personal property to an insurance company so that we don't have to pay out of pocket

Weighing the Risks of Going without Health Insurance

734 words - 3 pages Insurance is the most important that most in need of money come in handy, while not to buy insurance is facing are needed, there is no guarantee, can only sit. People may encounter many items of risks in one’s life, and each item is the unpredictable risks and is not a short-term treatment. In fact, whether you buy insurance or not, you have to pay for the risk, it is when the risk comes and economic losses, the money is the insurance company or

Industry Analysis of the Life Insurance Sector in India

3412 words - 14 pages risk-taking ability of the country. The impact of a healthy insurance sector on employment is also a very important dimension in the debate. Insurance is an employment generator, not only for the insurance industry, but has also created significant demand for a range of associated professionals such as brokers, insurance advisors, brokers, claim managers, underwriters and actuaries. The nature of the insurance business is such that the savings and

Insurance Models

2676 words - 11 pages The purpose for this paper is to discuss the importance of transferring risk of one’s assets regarding personal assets through the use of the many insurance models available in today’s market. There will be a discussion of what insurance is and what it represents to those insured. Following will be an explanation of the various insurance models available including whole life, term life, variable life, universal life, and index life programs. All

The Weather and The Insurance Industry

1305 words - 6 pages open up the insurance industry to more risk. Most of the insurance industry is driven by scientific study and they don’t really listen to people in right wing circles who think global warming isn’t happening. The insurance industries stance is that burning fossil fuels is the main culprit of global warming. The interesting part is that the insurance industry is doing nothing to combat global warming. A lot of scientists believe the Earth has

Understanding Insurance Coverage

881 words - 4 pages Introduction Insurance is a very important part of modern life and business. In this paper I will discuss the basic concepts of insurance, claims-made and occurrence liability policies, factors for selecting an insurance company and policies, and the difference between workers compensation and liability insurance. What is insurance? Insurance is a two-way legal agreement between the insurer and the customer. The customer, which may be an

Questions and Answers: Loss Prevention and Loss Reduction

955 words - 4 pages , firewalls and fire doors. Both risk controls are only justified when savings exceed loss. 6. Describe the advantages and disadvantages of using insurance as a loss-financing techniques. Insurance use as a loss-financial technique provide financial advantage. Business write the insurance premiums cost as a tax deduction expense. As long as the premiums are fix for the duration of the policy the budget is not. In addition, when the organization loss

Insurance broker

1039 words - 4 pages We picked broker/agent occupation for our assignment. Responsibilities of the job vary according to the size and type of employer: smaller companies offer less opportunity for specialization than larger firms. Typical duties include:Gathering information from clients, assessing their insurance needs and risk profileBuilding and maintaining ongoing relationships with clients including scheduling and attending meetings and understanding the nature

Health Insurance Exchanges

1133 words - 5 pages information to the potential member The creation of a separate administrative mechanism for enrollment proceedings Gaining more portability of coverage of health plans Changing how the health insurance market functions overall The original plan was to have one over arching federal health insurance exchange, which would create a large risk pool leading to lower health insurance premiums and rates. However this was adjusted to have individual

Solving the Adverse Selection Problem

698 words - 3 pages the market would be characterized by poor quality products. The government should put in place measures that would help an insurance company in providing enough information regarding its company and insurance products. Adequate information would give an insured individual confidence as far as insuring a risk is concerned.

Similar Essays

Why Are More People Who Are At Risk Of Suffering Losses From Disasters (Both Natural And Man Made) Not Insured Against Them, And What Policies Might Increase The Prevalence Of Insurance Against...

1956 words - 8 pages Examination Number: B030015Course: Economics 2Course Organiser: Michael WattsDate of Submission: 30/01/2014Question Why are more people who are at risk of suffering losses from disasters (both natural and man-made) not insured against them, and what policies might increase the prevalence of insurance against catastrophic losses?Word Count: 1941IntroductionInsurance is the one of the world's oldest financial tools. Traders have practiced it since

Why Are More People Who Are At Risk Of Suffering Losses From Disasters (Both Natural And Man Made) Not Insured Against Them, And What Policies Might Increase The Prevalence Of Insurance Against...

1956 words - 8 pages Examination Number: B030015Course: Economics 2Course Organiser: Michael WattsDate of Submission: 30/01/2014Question Why are more people who are at risk of suffering losses from disasters (both natural and man-made) not insured against them, and what policies might increase the prevalence of insurance against catastrophic losses?Word Count: 1941IntroductionInsurance is the one of the world's oldest financial tools. Traders have practiced it since

Risk In Insurance Essay

1303 words - 6 pages “Insurance tends to increase demand and make patients less price sensitive, which increases prices overall.” Insurance The basic concept of insurance is the transfer of risk from one entity to another through certain conditions. Health insurance is no different, only the entities mentioned are consumer or the patient and the insurance company. In the health insurance concept, a premium is paid by the individual to the company for a year

Insuring Your Resources Essay

1056 words - 5 pages expecting. Lastly, you should check to see if your personal insurance plan works for you. If not you can tweak it until it better fits you. 2.In understanding insurance in general, compare and contrast the distinctions of (a) pure risk and (b) speculative risk. Pure risk is risk in which there is only a chance of loss; also called insurable risk” (Hughes, 2009, p.310). Pure risk maybe losing your house in a fire because you do not have