Insurance, legal and regulatory

I. Risk and insurance

a. Definition of risk: the possibility of an unfortunate occurrence, doubt concerning
the outcome of a situation, unpredictability, the possibility of loss and the
chance of gain (such as hoped for benefit from a gamble or investment strategy).
There are many risks associated with this, including the risk that the car will be
stolen in the future, the risk of a car accident with or without injury to the driver,
the risk of unjuring others as a result of a car accident and the risk of damage to
the car caused by another driver
b. Other meanings of the term ‘risk’: the first refers to the peril or contingency that
is insurance-the fire risk, the theft risk and so on, the second use of the term
relates to the thing (or liability actually insured. In this context the ‘risk’ could be
a factory or a manufacturer’s liability to the public, when an underwriter quotes
for ‘a risk’ an even wider definition is implied. The underwriter will mean both
the thing insured, such as the property itself, and the range of contogencies or
scope of cover requires
c. The term risk is used in a number of different ways in the insurance market and
can mean the peril or contingency that is insured, the thing (or liability) actually
insured or both the thin insured and the range of contingencies or scope of cover
required
d. Type of risk that can be insured: the event insured against must be fortuitous (in
other word it must be accidental or unexpected and not inevitable) or
unforeseen, there must be insurable interest and insuring the risk must not be
against public policy
e. Risk has an element of uncertainty, unpredictability and sometimes danger
f. In order to be insurable risks must be financial (i.e. their impact be capable of
financial measurement), pure (i.e. not speculative) and particular (i.e. localized
and personal in their impact)
g. Peril and Hazard.
A Peril can be defined as the which gives rise to a loss. Examplethe overflow of
water of water tanks, lightning.
A hazard can be defined as that which influences the operation or effect of the
peril. example high value sports cars and a safari holiday. Hazard breaks down
into two futher parts physical hazard (security protection at a shop, the
construction of the property and the age of a proposer and type of car for motor
insurance) and Moral hazard (carelessness, dishonesty, social attitudes)