Insurable Risk

Insurable Risk An insurable risk is an event that: Has a chance of happening, but is uncertain: It's not guaranteed to occur, but there's a measurable probability that it will. Can cause significant financial loss: The event would result in substantial financial burden if it happened. Can be pooled with other similar risks: By sharing the risk with a large group of individuals facing similar potential losses, the financial impact on each individual is reduced. Examples of insurable risks; Vehicle accidents, fire damage, illness or disability. The conditions that makes a risk insurable are: 1- The peril insured against must produce a definite loss not under the control of the insured. 2- There must be a large number of homogeneous exposures subject to the same perils. 3- The loss must be calculable and the cost of insuring it must be economically feasible 4- The peril must be unlikely to affect all insureds simultaneously. 5- The loss produced by a risk must be definite and have a potential to be financially serious. Not all risks are insurable. Some risks are too unpredictable, too rare, or too difficult to measure, making them impractical for insurance companies to cover. Examples include: war and terrorism, moral hazard, where individuals are more likely to engage in risky behavior if they are insured. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful