risk examples | multivariable risk | influential in the probability

Univariate and multivariable risk classification;     

risk-examples

                                                                             The univariate risk classification consists of the study of the risk-based on a certain factor, studying whether or not it influences behavior or the probability of its occurrence. In this way, through the successive study of accident statistics based on factors considered individually, it can be determined which are influential and which are not.

            However, as we have already indicated in this section, often the behavior of risk based on a single factor is not linear, but other factors can influence its behavior, producing correlations between factors and interactions between them. It is, therefore, necessary to study combinations of factors two by two, three in three, four by four, etc., in order to determine the combinations which are influential in the probability of occurrence of the risk and which are not.

                For the study of the combinations of factors that are significant, that is, they influence the loss ratio, the called AID (Automatic Interaction Detection) techniques, which consist of the systematic study of all the factors, combined with each other. To do this, the study population is subdivided into groups, according to a characteristic factor and, in turn, within each group, it is subdivided again according to the remaining factors, until the resulting subgroups are too small in number to offer significant results.

           The study of the frequency of the occurrence of loss within each group indicates the combinations of factors that affect the greater or lesser probability with respect to the accident frequency of the entire population.

                     Once the combinations of factors that most influence the loss ratio, the risks are segmented based on these combinations and the application of different prices for each case.

                  Periodically, if the risk study is dynamic and incorporating new data into the statistical bases, the study must be carried out again to determine if the factors that were influencing the accident rate continue to be so or, on the contrary, have been modified.

 

PREVENTION AND SUBJECTIVE RISK;      

                                                                  Risk coverage through insurance does not mean that the person who is exposed to it disregards and must renounce the preventive measures that may minimize it or delay its occurrence. On the contrary, the individual must face the risks combining prevention and insurance measures since those, by improving risk behavior, allow it to be classified among the less serious and therefore affects the insurance premium.

              Risk prevention is the set of actions aimed at preventing the event from occurring and, if it occurs, ensuring that its consequences have the least possible economic impact.        

                On the contrary, the so-called "subjective risk" can influence        the aggravation of risk regardless of the objective characteristics of the same that affect the classification. Subjective         risk   is that derived from the insured's own circumstances, the greater propensity of the one who is most exposed to risk to take out the insurance, or even the possible intentionality, circumstances that is difficult to objectify but that may influence the risk assessment.

 

                 RISK SELECTION AND SURVEILLANCE;

                                Risk selection is the operation carried out by the insurer, deciding in each case the acceptance or rejection of those that are offered for coverage.

                                        Risk selection consists of considering each risk individually, in order to decide whether or not the proposed    risk agrees or not with the forecasts for all risks of the same class, that is, with risk segmentation previously performed.

                             Risk selection, therefore, does not tend to eliminate or reduce the possibilities that the feared event occurs, but rather its purpose is to make the reality of the risks    covered    coincide with the      assumptions that served as the basis for their calculation.

                         The distinction between normal and abnormal risks should not be confused with the expression used in insurance practice of "good risks" and "bad risks". This last classification refers to the lesser or greater severity of the risk, while what the selection seeks is the knowledge of whether the proposed risk is normal (included within the forecasts) or not.

                            Selection methods in each insurance branch vary. So by For example, in the lifeline, the selection consists of finding out the health status of the candidate, which may even determine the prior medical examination of the insured. This avoids anti-selection, that is, the influx of people with precarious health to the insurance, therefore outside the statistical bases of the normal population.

              It is also necessary to examine subjective aspects, circumstances Contractor's personal characteristics, such as his morality, the adequacy of his financial means to the importance of the premiums to be paid, etc. It is the so-called subjective risk that we have already defined.

                    In the other insurance lines, the selection is carried out by handling no only the experiences but the criteria of each insurance company.

                     By way of example only, two of the many aspects of risk selection:

                          One of them is the importance of coverage. Rules in this regard the principle of the need, for the entity, to level the number of its acceptances, setting itself a limit that is a function of its guarantee possibilities. The higher the severity, the lower the coverage, and vice versa.

                                         Another selection criterion is the exclusion or restriction of certain classes of insurance, for various reasons, such as unfavorable results, without the possibility of correction;

                                              Problems derived from your reinsurance coverage, etc.

           Risk surveillance is very similar to screening, but while this is carried out prior to the acceptance of the risk, surveillance is practiced during the course of the contract, in order to modify the conditions of the insurance, adopt measures that determine its technical normality, or rescind it, as a last resort.

                             Risk surveillance should be done from two perspectives:

                          > Individual surveillance, policy by policy, consists of the examination that the objective and subjective conditions of risk still coincide with the insured's declarations.

                             > Collective surveillance, It is necessary to study the joint evolution of the risks, rectifying their classification if necessary. In addition, there is joint preventive action with a view to collective security, either privately by the insurance institution or in collaboration with the State, to which it can facilitate initiatives derived from its own experience.