Question

RMI 3.2

Describe two types of pure risk for which the technique of risk pooling can be used to reduce risk.

In you answer, describe the characteristics of pure risks that make them well or poorly suited for risk reduction through pooling.

Answer 1

Pure risk where there is generally a outcome it would loss or no loss in the least. There aren't any opportunities for gain or profit once pure risk is concerned. Pure risk is mostly rife in things like natural disasters, fires, or death. These things cannot be foretold and are on the far side anyone's management. Pure risk is additionally cited as absolute risk. There aren't any measurable edges once it involves pure risk.

Types of Pure Risk

Personal risks directly have an effect on a private and will involve the loss of earnings and assets or a rise in expenses. For instance, state could produce monetary burdens from the loss of financial gain, and employment edges. Fraud could lead to broken credit, and poor health could lead to substantial medical bills, furthermore because the loss of earning power, and therefore, the depletion of savings. Property risks involve property broken because of uncontrollable forces like fireplace, lightning, hurricanes, tornado, or hail.

Liability risks could involve proceedings because of real or perceived injustice. For instance, someone abraded when slithering on somebody else's icy route could sue for medical expenses, lost financial gain, and different associated damages.

Unlike most speculative risks, pure risks are generally insured through industrial, personal, or insurance policies. People transfer a part of a pure risk to associate degree in insurance company. For instance, owners purchase home insurance to safeguard against perils that cause injury or loss. The insurance company currently shares the potential risk with the house owner.

Pure risks are insured partially as a result, the law of enormous numbers applies a lot of without delay than to speculative risk.

(Note: Please like and UPVOTE my answer as this will help me to answer more question .THANK YOU IN ADVANCE FOR UPVOTE.)