Insurable Risk

Only available on StudyMode
  • Topic: Insurance, Risk, Actuarial science
  • Pages : 5 (1228 words )
  • Download(s) : 47
  • Published : March 10, 2013
Open Document
Text Preview
The loss must be accidental and significant enough to be considered a hardship to the insured.

The loss must be accidental and significant enough to be considered a hardship to the insured.

INSURABLE RISK
The loss must also be part of a similar group of risks, so as to make the loss foreseeable. The loss must also be part of a similar group of risks, so as to make the loss foreseeable. The possible loss must be plainly explained.

The possible loss must be plainly explained.

The loss must not occur at the same time as multiple others. The loss must not occur at the same time as multiple others. DEFINITION:
A risk that conforms to the following criteria:
DEFINITION:
A risk that conforms to the following criteria:

The insurer must be able to compute the probability of a loss and a realistic cost for the insurance. The insurer must be able to compute the probability of a loss and a realistic cost for the insurance.

THE LOSS MUST BE DUE TO CHANCE.
Regular recurring losses such as shoplifting in a supermarket are built into the price and would not be insurable as it is not fortuitous. THE LOSS MUST BE DUE TO CHANCE.
Regular recurring losses such as shoplifting in a supermarket are built into the price and would not be insurable as it is not fortuitous. THE LOSS MUST BE DEFINITE AND MEASURABLE.
This means that there must be bills to establish "proof of loss," not just casual references. THE LOSS MUST BE DEFINITE AND MEASURABLE.
This means that there must be bills to establish "proof of loss," not just casual references.

THE LOSS EXPOSURES MUST BE LARGE.
To avoid adverse selection, there must be enough exposure to losses for the frequency to be predictable and to be grouped for the purpose of establishing rates. THE LOSS EXPOSURES MUST BE LARGE.
To avoid adverse selection, there must be enough exposure to losses for the frequency to be predictable and to be grouped for the purpose of establishing rates. THE LOSS MUST BE PREDICTABLE it must be of such a nature that its frequency and average severity can be readily determined to establish the required premium. THE LOSS MUST BE PREDICTABLE it must be of such a nature that its frequency and average severity can be readily determined to establish the required premium.

ELEMENT OF INSURABLE RISK
ELEMENT OF INSURABLE RISK

THE LOSS EXPOSURES MUST BE RANDOMLY SELECTED.
Concentration of risks by area, age groups, occupations, economic status, etc., can lead to adverse selection. THE LOSS EXPOSURES MUST BE RANDOMLY SELECTED.
Concentration of risks by area, age groups, occupations, economic status, etc., can lead to adverse selection. THE LOSS CANNOT BE CATASTROPHIC. All individual losses are personal catastrophes. The reference here is to national or area disasters, such as floods, riots, wars, earthquakes, etc. These events will often have coverage amount limitations in the property and casualty insurance areas. THE LOSS CANNOT BE CATASTROPHIC. All individual losses are personal catastrophes. The reference here is to national or area disasters, such as floods, riots, wars, earthquakes, etc. These events will often have coverage amount limitations in the property and casualty insurance areas.

DIFFERENCES BETWEEN INSURANCE AND TAKAFUL
ITEM| PERTINENT ISSUES| INSURANCE| TAKAFUL|
1.| Essence of Intention| Intention is to create legal relation only| Intention is to create both spiritual and legal relationship. | 2.| Formalities| Bilateral contract| Unilateral contract for Tabarru’ and bilateral contract for Mudarbah and Wakalah.| 3.| Accounts Treatment| For General insurance the paid premium is credited into the General Insurance Account. In life the premium is credited into Life Insurance Account.| For General Tkaful the account is Tabarru’ means donation. For Family Takaful, there are two accounts, PA treated in line with the principles of Mdarabah, while PSA treated in line with the basis of...
tracking img