Risk and Insurance

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to know about Risk and Insurance we have first to define some concepts like :

Risk : is an uncertainty concerning the occurrence of loss .

ex : the risk of dying because of an accident .

Loss Exposure : is any situation or circumstance in which a loss is possible , regardless of whether a loss occurs or not .

and there are many types of Risk

1- Objective Risk : is defined as the relative variation between the actual loss and the expected loss and it depends on the calculations of the actual and expected loss .

2- Subjective Risk : is defined as uncertainty based on a person mental condition or state of mind and it differs from one person to another .

3- Pure Risk : is defined as a situation in which there are only possibilities of loss or no loss .

ex : a host of a family may die ( loss ) or not ( no loss ) .

4- Speculative Risk : is a situation in which there is either profit or loss is possible .

ex : if some on purchases 100 shares of common stock in the stock market and the price of the stock increases , there will be a profit but if the price of the stock decreases , there will be a loss .

5- Diversifiable , unsystematic or particular Risk : is the risk that affects only individuals or small groups of people and not the entire economy .

ex : the theft of some one's car .

6- Non-Diversifiable , systematic or fundamental Risk : is the risk that affects the entire economy or a large number of persons or groups within the economy .

ex : a flood , hurricane or a war .

7- Enterprise Risk : it contains all major types of Risks that may face a business firm such as : Pure Risk , Speculative Risk , Strategic Risk , Operational Risk or Financial Risk .

Risk Management : is the process of identifying Loss Exposures and selecting the most appropriate technique or combination of techniques for treating such exposure .

there are two techniques to treat Loss Exposure :

1- Risk Control 

2- Risk Financing 

1- methods of Risk Control :

A) Avoidance : it means that a certain Loss Exposure in never acquired or an existing Loss Exposure is abandoned .

B) Loss Prevention :it refers to measurements that aim at reducing the probability of loss , so that frequency of loss is reduced .

C) Loss Reduction : it refers to measurements that aim at reducing the severity of loss after it occurs .

2- methods of Risk Financing

A) Retention : means that a person or a firm decides to retain part or all of the losses that can result from a given Risk .

B) Non-Insurance Transfer : is the method other than Insurance by which a Pure Risk is transferred to another party .

C) Insurance : there is no single definition for Insurance but the most accurate one is : the pooling of fortuitous losses by transferring of such risk to insurers  who agree to indemnify insureds for such losses .

there are many types of Insurance policies to insure any thing that can be insured like :

Life Insurance , Health Insurance , Property Insurance , Liability Insurance , .. etc.

Insurance is so useful as it decreases worry and fear , reduce uncertainty , the Insurance company may provide other Risk Management services and most importantly the insured is indemnified for losses after they occur .

those were just some information about Risk and Insurance and hope you get some benefits from it .

written by : Mohamed Mostafa 

About the author


20 years old guy was born in 1993 from Cairo and studying at faculty of commerce English section Cairo university and interested in the online jobs widely .

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