People living in group with mutual co-operation and supporting each other is known as society. Our society is full of risks. Risk may arise from various incidents such as plane crash, traffic accident, shocking terrorist attack, burglary, natural disasters, catastrophic disease, financial ruins etc. We know that there are unexpected losses of life and wealth due to the clash between the government and Maoists in Nepal. Thousands of people died one are missing as a result of the attack. Road accidents are increased day to day. Motorists die or are severely injured in auto accident. Homeowners lose their homes and personal property because of incur catastrophic medical bills and the loss of earnings because of heart disease, cancer, Aids, or other disease. Still others face financial ruin because they negligently injure someone and can not pay a liability judgment. In international events. We can not forget the terrorists hijacked jet planes and crashed into the World Trade Center towers and the war in Afghanistan and Iraq, internal clash in Middle East. Recently “Tsunami” sea wave hit the Asian region. Such disasters and losses con not be completely controlled but the risk from them can be minimized by preventive measures. In other hand, loss from risk can be financially refunded by insurance.
Meaning of Risk.
Risk has several meanings. The meanings differ according to their field of use. In general sense, risk refers to the possibility of meeting danger. It is the change of something’s going wrong: Risk is the danger indication that injury, damage or loss will occur. In a broader sense, risk in uncertainty. Uncertainty refers to unknown result of an event. The result may be helpful or harmful to human interest. Uncertainty about future is basic fact of human life. If uncertainty brings helpful result, it is okay. But the result may be harmful too. People are not ready to accept the harmful result from future uncertainty although it is inevitable.
People always search opportunity or way to seek solution for future uncertainty. They are eager to find means to minimize the uncertain risk and get away from the harmful result from the risk in future. While searching’s for the solution to minimize harmful risk, insurance business has emerged.
People always search opportunity or way to seek solution for future uncertainty. They are eager to find means to minimize the uncertain risk and get away from the harmful result from the risk in future. While searching’s for the solution to minimize harmful risk, insurance business has emerged.
Change of loss
Change of loss is related to the concept of risk. Change of loss is defined as the probability that a unfavorable event will occur. Like risk “probability” has both objective and subjective aspects.Objective Probability: It refers to the long run relative frequency of an event based on the assumption of an infinite number of observations. Objectives probability can be determined in two ways.
First, they can be determined by deductive reasoning. These probabilities are called priori probabilities. For example, the probability of getting a head from the toss of a perfectly balanced coin is 13 second, objective probabilities can be determined by inductive reasoning. For example, the probability that a person aged 21 will be die before age 26 can not be logically deducted. However, by a careful analysis of past mortality experience, life insurance can estimate the probability of past mortality experience, life insurance can estimate the probability of death and sell a five year term life insurance polity issued at age 21.
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