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finally, you' re going to get all the information about the principle of insurance. that article will help you to understand every thing about principle of insurance. insurance. Principle Of Insurance- A large number of homogeneous exposure units.

Commercially insurable risks typically share seven common characteristics. The vast majority of insurance policies are provided for individual members of very large classes. There are exceptions to this criterion. Automobile insurance, covered about 175, for example million automobiles in the United States in 200 The existence of a large number of homogeneous exposure units allows insurers to benefit from the so- called" law of large numbers, " which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. Lloyds of London is famous for insuring the life or health of actors, actresses and sports figures. Large commercial property policies may insure exceptional properties for which there are no' homogeneous' exposure units.

Satellite Launch insurance covers events that are infrequent. Despite failing on this criterion, many exposures like these are generally considered to be insurable. The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. Principle Of Insurance- Definite Loss. The classic example is death of an insured on a life insurance policy. Other types of losses may only be definite in theory.

Fire, and worker injuries, automobile accidents may all easily meet this criterion. Occupational disease, may involve prolonged, for instance exposure to injurious conditions where no specific time, place or cause is identifiable. Principle Of Insurance- Accidental Loss. he event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. Ideally, place and cause, the time of a loss should be clear enough that a reasonable person, could objectively verify, with sufficient information all three elements. The loss should be' pure, ' in the sense that it results from an event for which there is only the opportunity for cost. TO GET THE FULL DETAILS FOR EVERY TYPE OF INSURANCE TRY TO VISIT.

Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable. All Insurance Types. The size of the loss must be meaningful from the perspective of the insured. Principle Of Insurance- Large Loss. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, and supplying the, adjusting losses capital needed to reasonably assure that the insurer will be able to pay claims. There is little point in paying such costs unless the protection offered has real value to a buyer.

For small losses these latter costs may be several times the size of the expected cost of losses. Principle Of Insurance- Affordable Premium. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. There are two elements that must be at least estimatable, if not formally calculable: the probability of loss, and the attendant cost. Principle Of Insurance- Calculable Loss.

Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim. The essential risk is often aggregation. Principle Of Insurance- Limited risk of catastrophically large losses. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5% . The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten.

In extreme cases, the aggregation can effect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.