Question

Principles of Risk Management and Insurance (12th Edition) by George E. Rejda

1 ) Describe the steps in the pre-loss risk management process.

2) explanation What are the steps in the loss adjustment process?

3)What are the benefits and the costs to society of operating an insurance mechanism?

Answer 1

Answer(1) THE RISK MANAGEMENT PROCESS

1. Determination of objectives
2. 2. Identification of risks
3. Evaluation of risks
4. Consideration of alternatives - selection of the tool
5. Implementing the decision
6. Evaluation and review

Answer(2)
When presented with a claim, the insurance company either pays the claim or denies it. Most claims are paid, but a few will be denied, either because the loss did not occur or because it is not covered by the policy. A loss may not be covered because it was excluded, the policy lapsed, the loss was not within the scope of the insurance agreement, or the insured violated a policy condition.

There are 4 main steps in loss adjustment process, which may vary, depending on the type of insurance: notice of loss, investigation, proof of loss, and payment or denial of claim.

1. The 1^st step in the claim, naturally enough, is to give notice to the insurance company that the loss has occurred. Most insurance contracts require that the insured notify the company either immediately or as soon as possible, so that evidence can be preserved for the investigation. Additionally, the insurance contract may require that the insured also take other steps to gather or preserve evidence of the loss, such as gathering the names and contact information of everyone involved in an accident.
2. An investigation determines whether there was a loss covered by the policy, whether policy conditions were met both before and after the loss event, and the amount of the loss. A loss will only be covered by a policy if it occurred within the policy period, if the loss was caused by a covered peril, and it satisfies the other conditions of the insurance contract. Whether the policy was in effect when the loss occurred will be especially important if the insurance was just purchased or if it lapsed.
3. In the 3^rd step, the insured may be required to file a proof of loss within a specified time, which is a sworn statement that the loss occurred, the circumstances of the loss, whether any other insurance covered the loss, and the amount of the loss.
4. The final step is for the insurance company to either pay or deny the claim

Answer(3)
To many individuals, insurance may seem like nothing more than a monthly or annual bill they must pay because the state government or a lender requires it. The reality of the insurance industry is that it is a vital force in securing the well-being of both individuals and businesses, and it actively promotes the health and security of the economy and business environment around the world.

Stress Relief

At its most basic, insurance offers mental relief from the constant uncertainty of potentially adverse circumstances. You may not be able to prevent the fire in your home or business, but at least you know your insurer will pay for most of your out-of-pocket costs. Similarly, you can't predict the day you're diagnosed with a terminal disease; but if your life and health insurance policies are in force, you know you can pay for treatment and provide for your family when you're gone.

Business Risk

The evolution of any business is based on risk. For example, airlines carry an enormous amount of risk when they fly planes full of passengers each day. The plane itself is worth a lot of money, the passengers all face injury and death, and the baggage could get lost or damaged. Airlines carry insurance policies to manage all this risk. Without an insurer willing to pay these various liabilities on their behalf, airlines would not function. Insurance allows businesses to take necessary risks without fear of huge financial loss.

Safety

Insurance is not just about paying losses that occur but also preventing losses in the first place. Because fire insurers know, often much better than individuals and businesses, the causes of many fires, they can offer professional assistance for avoiding the most common causes of fire loss. Similarly, workers' compensation insurers deal with workplace injuries every day. They can advise businesses about proper safety techniques to minimize injuries and make the business a safer place for workers and customers alike.

Economic Stimulation

Insurers do not immediately spend all the premium dollars they collect. Generally, insurers are required by state governments to maintain a cash reserve equal to or greater than a certain percentage of their liabilities. While they possess this money, they tend to invest it in a wide range of endeavors, from municipal contracts to short-term bonds. Local, state, federal and international economies are all bolstered by insurance companies when they use their pooled capital to fund other projects until it is needed to cover a loss.