Question

Think about yourself, your home, your car, your job and so on. What risks that you face are covered by insurance? More importantly, what risks are NOT insured against?

Consider these risks and what extensions to your insurance cover you might contemplate?

Recent events in the financial sector have shown that risk perception plays a critical role in effective risk management. How much influence do you think any one individual should have alone on key risk management decisions eg traders, managers?

Answer 1

Ans. All Risks Coverage - property insurance covering loss arising from any fortuitous cause except those that are specifically excluded. This is in contrast to named perils coverage, which applies only to loss arising out of causes that are listed as covered. Although many industry practitioners continue to use the term "all risks" to describe this approach to defining covered causes of loss in a property insurance policy. It is no longer used in insurane policies because of concern that that the word "all" suggests coverage that is broader than it acually is.Because of this concern, some industry practitioners have begun to use the term "open perils" or "special perils" instead of all risks."

In simple words risk is danger, peril, hazard, chance of loss, amount covered by insurance, person or object insured. The risk is an event or happening which is not planned but eventually happens with financial consequencies resulting in loss. There is saying higher the risk more the profit.

A risky proposal can on one hand bring higher profits but on the other hand looming losses. The risk can never be certain or predictable. Therefore there is need for risk management.

An insurance company is responsible for the three following things :

1. Risk Control - Insurance companies help their clients to control and mitigate the risk. They help the person facing risk to control it.

2. Risk Financing - If a client faces some loss, an insurance company finances the individual to bear the loss of the damage whenever it occurs.

3. Risk Sharing - Different categories of people are bought together by the insurance companies who is willing to insure themselves or property against risk together.

Various types of risks covered by insurance companies :

1. Personal Risks - These are the risks that are related to the individual health such as accidents, illness, disease or death.

2. Property Risks - Because of natural unforeseen circumstances, an individual or business may face a huge loss and can lose its property. These unforeseen events can be such as earthquake, fire, flood etc.

3. Liability Risk - When a person or business found guilty because of the negligence when they make other people lose their property or lives because of the careful and wild acts.