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Management of Risk by Individual - Insurance Business and Market, Principles of Insurance Video Lecture | Principles of Insurance - B Com
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FAQs on Management of Risk by Individual - Insurance Business and Market, Principles of Insurance Video Lecture - Principles of Insurance - B Com
| 1. What is risk management in the insurance business? |  |
Ans. Risk management in the insurance business refers to the process of identifying, assessing, and prioritizing risks that could potentially impact the insurance company's financial stability and profitability. It involves implementing strategies to minimize or mitigate these risks, such as diversifying the insurance portfolio, setting appropriate premiums, and creating reserves for potential claims.
| 2. How does insurance help individuals in managing risk? | |
Ans. Insurance helps individuals in managing risk by providing financial protection against unexpected events or losses. When individuals purchase insurance policies, they transfer the risk of potential loss to the insurance company in exchange for payment of premiums. In the event of a covered loss, the insurance company compensates the individual for the financial damages incurred, thereby reducing their personal exposure to risk.
| 3. What are the principles of insurance that support risk management? | |
Ans. The principles of insurance that support risk management include:
1. Principle of Utmost Good Faith: Both the insured and the insurer must disclose all relevant information honestly and transparently.
2. Principle of Insurable Interest: The insured must have a financial interest in the property or person being insured.
3. Principle of Indemnity: Insurance policies aim to compensate the insured for the actual financial loss suffered, without providing an opportunity for profit.
4. Principle of Subrogation: If the insurer pays a claim, they are entitled to take legal action against any third party responsible for the loss.
5. Principle of Contribution: If multiple insurance policies cover the same risk, each insurer contributes proportionately towards the claim settlement.
| 4. How does the insurance market function in managing risk? | |
Ans. The insurance market functions as a platform where individuals and businesses can transfer their risks to insurance companies. In this market, insurance companies assess and analyze risks, set premiums based on the level of risk, and provide coverage against potential losses. The insurance market facilitates risk sharing among policyholders, as the premiums collected from many individuals are pooled to cover the claims of a few who experience losses. This helps in managing risks on a broader scale and reducing the financial burden on individuals.
| 5. What are some common risks that individuals seek insurance coverage for? | |
Ans. Individuals seek insurance coverage for various common risks, including:
1. Health Risks: Medical expenses, hospitalization, and treatments for illnesses or injuries.
2. Property Risks: Loss or damage to homes, vehicles, or personal belongings due to theft, fire, natural disasters, or accidents.
3. Liability Risks: Legal responsibilities for injuries or damages caused to others.
4. Life Risks: Financial protection for dependents in the event of the policyholder's death.
5. Income Risks: Loss of income due to disability, unemployment, or business interruptions.
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Dec 23, 2024 Last updated |
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