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Unexpected Eventualities - Risk Management and Insurance, Principles of Insurance Video Lecture | Principles of Insurance - B Com

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FAQs on Unexpected Eventualities - Risk Management and Insurance, Principles of Insurance Video Lecture - Principles of Insurance - B Com

1. What is risk management and why is it important in insurance?
Ans. Risk management refers to the process of identifying, assessing, and prioritizing potential risks in order to minimize the negative impact they may have on an organization or individual. In the context of insurance, risk management is crucial as it helps insurers understand and evaluate the potential risks associated with insuring a person or property. By effectively managing risks, insurers can determine appropriate insurance coverage and premiums, ensuring the financial stability of the insurance industry.
2. What are unexpected eventualities in the context of insurance?
Ans. Unexpected eventualities, also known as unforeseen circumstances, are events or incidents that occur unexpectedly and may result in financial loss or damage. In insurance, unexpected eventualities refer to risks or perils that were not anticipated or planned for by the insured party. These could include natural disasters, accidents, theft, or other unforeseen events. Insurance policies are designed to provide coverage and financial protection against these unexpected eventualities.
3. What are the principles of insurance?
Ans. The principles of insurance are the fundamental concepts that guide the insurance industry. These principles include: 1. Principle of Utmost Good Faith: Both the insured and the insurer must act honestly and disclose all relevant information when entering into an insurance contract. 2. Principle of Insurable Interest: The insured must have a financial interest in the property or person being insured. This ensures that insurance is not used for speculative purposes. 3. Principle of Indemnity: Insurance policies aim to provide financial compensation that restores the insured to the same financial position they were in before the loss occurred, without making a profit. 4. Principle of Subrogation: If the insured receives compensation for a loss, the insurer is entitled to take legal action against any third party responsible for the loss to recover the amount paid. 5. Principle of Contribution: If an insured has multiple insurance policies covering the same risk, each insurer will contribute proportionately towards the claim.
4. How does risk management help in minimizing insurance premiums?
Ans. Risk management plays a significant role in determining insurance premiums. By effectively managing risks, individuals or organizations can demonstrate to insurers that they have taken necessary precautions to minimize the likelihood and severity of potential losses. This reduces the overall risk exposure for insurers, allowing them to offer lower insurance premiums. For example, implementing safety measures, such as installing security systems or conducting regular maintenance, can reduce the risk of theft or property damage, resulting in lower premiums.
5. What is the relationship between risk management and insurance claims?
Ans. Risk management and insurance claims are closely interconnected. Effective risk management practices can help reduce the frequency and severity of insurance claims. By identifying and implementing risk mitigation strategies, individuals or organizations can minimize the likelihood of experiencing losses and the need to file insurance claims. Additionally, risk management can help insured parties navigate the claims process more efficiently by providing accurate documentation, evidence, and supporting information. This enhances the overall claims experience and ensures a smoother settlement process.
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