UNIT-14
BUSINESS RISK AND INSURANCE
14.2 WHAT IS A BUSINESS RISK :-
→ The term 'business risk' may be defined as the uncertainty of occurrence of economic loss in the event of any business activity.
14.4 TYPES OF BUSINESS RISKS :-
(1) Pure vs Speculative Risks.
(2) Dynamic vs Static Risks.
(3) Risk Classified by Loss Severity.
(4) Objective vs Subjective Risks.
14.5 RISK MANAGEMENT :-
(1) Risk Identification.
(2) Assess the intensity of financial loss.
(3) Consider various tools of risk management.
14.6 WHAT IS INSURANCE :-
→ Insurance is a form fo contract between two parties where by one party (insurer) undertakes in exchange for a fixed amount of money (premium) ot pay to other pary (insured) a fixed amount of money or compensate the loss on the happening of a certain event.
• Assurance :-
→ The term 'assurance' is used in thoe contacts which guarantee the payment of a certain sum on the happening of a specified event which is bound to happen sooner or later.
14.7 INSURABLE RISKS AND NON-INSURABLE RISKS :-
→ Characteristics of insurable risks are as follows:-
(1) The risk should be accidental or random in nature.
(2) The amount of loss should be measurable and possible to estimate.
(3) There should be a sufficiently large number of units exposed to the same risk.
(4) The units facing the same risk must be spread over large geographical area.
• Non-insurable risks include :-
(1) Risk due to war and certain risks such as radio activity arisin from nuclear fusion.
(2) Risks incapable of measurement such as unforeseen changes in fashion, marketing of new products
(3) Risks too small and recurring tooo frequetly or risks so large and recurring so infrequently.
14.9 KINDS OF INSURANCE :-
(1) Life Insurance
(2) Marine Insurance
(3) Fire Insurance
(4) Motor Insurance
(5) Others Insurance/ Miscellancous Insurance
