When we talk about insurance, we talk about risks in all their forms. Therefore, having an insurance policy is just a way to share our risks with other people with similar risks.
However, if certain risks can be insured (insurable risks), others can not be insured according to their nature (uninsurable risks).
Insurable risks are the type of risk in which the insurer anticipates or insures because it is possible to collect, calculate and estimate probable future losses. Insurable risks have previous statistics that serve as a basis for estimating the premium. It offers a prospect of loss but no gain. Risks can be foreseen and measured, eg automobile insurance, marine insurance, life insurance, etc.
This type of risk is one in which the likelihood of occurrence can be inferred, from the information available on the frequency of similar earlier occurrence. Examples of what is an insurable risk as explained:
Example 1: The probability (or chance) that a certain vehicle will be involved in an accident in 2011 (on the total vehicle insured this year 2011)) can be determined from the number of vehicles involved in accidents in each of the previous years (out of the total vehicles insured during those years).
Example2: The probability (or chance) that a man (or woman) of a certain age will die during the year of Insurance can be estimated by the fraction of people of this age who have died in each of the previous years.
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Example 1: The likelihood that the application & # 39; a product drops the & # 39; next year due to a change in consumer tastes will be difficult to estimate since earlier statistics required
Example 2: The possibility that a current production technique become obsolete or out of date by next year due to technological progress.
Other examples of no unsustainable risks are:
1. Acts of God: All risks involving natural disasters called acts of God such as
It should be noted that any building, property or life insured but lost during a case of force majeure (listed above) can not be compensated by an insurer. In addition, this non-insurability is extended to those related to radioactive contamination.
2. Game: You can not bet your chances of losing a game.
3. Loss of profit by competition: You can not insure your chances of winning or losing in a competition.
4. Launch of a new product: A manufacturer who launches a new product can not ensure the chances of acceptance of the new product since it has not been tested on the market.
Loss resulting from mismanagement / ineffectiveness: The ability to successfully manage an organization depends on many factors and the profit / loss depends on the judicious use of these factors , including an effective management capacity. The expected loss in an organization due to inefficiency can not be assured.
6. Wrong location of a business: A person who locates a business in a poor place must know that the probability of his success is slim. Insuring such an activity is a sure way to fool an insurer.
7. Shortfall due to declining demand: The demand for any product varies with time and other factors. An insurer will never insure against the expected loss due to a decline in demand.
8. Speculation: This is the commitment in a company offering the possibility of considerable gain, but the possibility of loss. A typical example is the action or practice of investing in stocks, property, etc., in the hope of profiting from a rise or fall in market value, but with the possibility of a loss. This insurance can not be insured because it is considered an uninsurable risk.
9. Opening of a new store / office: The opening of a new store is considered an uninsurable risk. You do not know what to expect in the operation of the new store; it is illogical that an insurer agrees to insure you a new shop.
10. Fashion change: Fashion is a trend that can not be predicted. Any expected change of mode can not be assured. A fashion house can not be assured because the elements of the fashion house can become obsolete at any time.
11. Automobile Accidents: You Can not Get an Insurance Policy Against Fines Provided for Offenses Committed on Wheels
However, it should be noted that it is not necessary to There is no clear distinction between insurable and uninsurable risks. Theoretically, an insurance company should be prepared to insure anything if a sufficiently high premium is paid. Nevertheless, the distinction is useful for practical purposes.