The risk | what is insurance definition |RISK CLASSES

The risk;

the-risk

        In insurance terminology, the risk is the possibility that a future event occurs, uncertain, beyond the control of the parties, with economically unfavorable consequences.

       It is the foundation of insurance and its definition and knowledge are the basis for the insurance company to assume its coverage.

            The word risk in its general meaning means “contingency or proximity of damage” that is danger.

          However, from the insurance point of view, the idea of danger-damage should be dispensed with, and considered fundamentally as the uncertainty before the occurrence of a certain event, not necessarily harmful, which is unknown when it will occur and which may cause economic necessity. 

             The economic element is fundamental, because if there is no damage Valuable in money, or cost for repairing the damage produced by the event, this cannot be classified as a risk from the point of view of insurance terminology.  

                                                    

        There are events, such as living many years that are in principle considered beneficial and desirable and in the general sense no one would qualify as a risk;

                              But from an insurance perspective they can be denominated as such if their occurrence produces needs economic to the individual.

        Taking all this into account, from the insurance point of view, the Risk is the possibility of a future, uncertain event occurring (that is, in whose occurrence occurs by chance), beyond the will of the parties, with economically unfavorable consequences.

       These economic consequences may refer to the loss of a valuable object, the expenses that arise as a result of the occurrence of the risk, the need to receive aid or services, the payments that the individual must face and that would not occur if the event in the question does not happen.

            It is therefore evident that only part of the possible events are risks. If we consider the different categories of events or facts we can carry out the following classification

                                                     

 

ONLY A PART OF THE POSSIBLE EVENTS ARE RISKS;

                                Past                                    

Events or Facts      current      dependents of the will        some

                 Futures      Independent of theWill       Impossible

                                                                              Economically Favorable                                                            Uncertain   Economically in different                                                                                Economicallyunfavorable

                                      

         That is, the facts or events can be current, past, or future. These can be influenced by the will or be independent. These the latter may, in turn, be true, impossible, or uncertain (in which chance intervenes).

        Finally, within future, uncertain and independent events at will, there are economically favorable, indifferent or unfavorable.

         Well, following the underlined, we obtain the definition of risk:

       Possibility of an event occurring, future, independent of the will, uncertain, and economically unfavorable. The economically unfavorable consequences of risk can refer not only to the direct damage suffered by the   Individual as a consequence of the occurrence of the same but also to other indirect consequences. Thus, they can refer to:

       > Direct capital losses derived from the occurrence risk.

    > Indirect capital losses that are a consequence of the said occurrence

      > Acquisition losses, that is, income that stops Perceived as a consequence of the accident.

                                                            

           Regarding the uncertainty or influence of chance on risk, it is usually refers to the possibility of it happening or not, but there are cases where that it is known that the event will occur, the uncertainty residing in the time in which said occurrence will take place, or the amount of damage economic it will produce.

        For the purposes of defining the risk that we have been carrying out, to consider a future event as a risk it is enough that there is uncertainty in any of these three elements: "if" will occur the fact, "when" will occur or "how much" will be the economic consequence of the same. For example, the risk of death is considered as such despite if the fact of death is evident and true since uncertainty is referred to the moment or "when" it will occur.

 

RISK CLASSES;

                                 Risk defined future, uncertain, alien to the will, and economically unfavorable, the classes of risk that can be considered should be studied.

                                             Thus, depending on the object on which the risk falls, it may be:

                              > Personal: when it falls on people. For example, the risk to die, to lose physical integrity as a result of an accident, or loss of health. 

                             > Real: when risk affects things. For example, fire, theft of objects, etc.

                    > Patrimonial or liability: The one in which it is affected, if the risk occurs, the assets of the individual, generically considered.

                       > For example, causing damage to third parties driving a car, which creates an obligation to repair the damage caused. 

                          

                                                        

Taking into account its nature, the risk may be:

      > Stationary: when the possibility of the event occurring is it remains constant in itself over time. That is to say, the time the object has been exposed to the risk does not change its possibility of occurrence.

       > Variable: one whose nature has implicit in itself the increased or decreased risk by the mere course of the weather.

Variable risks can be:

                               > Increasing: when the probability of occurrence of the loss is growing.

                       > Decreasing: when the said probability is decreasing.

            For example, the possibility of a fire occurring is itself stationary, that is, it does not vary with time. Instead, the risk of dying is an example of increasing variable risk, since the probability of death increases with age. The risk of survival, on the other hand, will be a decreasing variable risk.

                                                According to the number of times that the risk can affect the same object of risk, a distinction can be made between:

              > Single event risks (can only occur once). 

            > Risks of multiple or recurring events (several events may occur times on the same person or object).

          In the first case, the risk disappears after a Sinister. In the second case, the risk subsists, and new claims on the same risk unit.

           Finally, according to the possible degrees of intensity, the risks they may be:

            > Homograde: are those in which the possible event, it is produced, has a unique intensity.  

               > Heterogrades: are those that can affect different intensity to people or things and, therefore, can produce various economic consequences.                                     

               The most characteristic example of homogenous risk is the risk of dying.

               The risk of an accident is heterogeneous since it can have different degrees of consequences, the risk of fire, that of disease, etc.

               Most of the risks can be included in two large groups, since most of them, are, simultaneously, stationary, recurrent and heterograde, or variable, single event and homograde, also simultaneously.

 

                                                                                 

ALMOST ALL RISKS CAN BE FITTED IN TWO GROUPS;

 

        Non-Life Risks                                                 Life Risks  

              Stationary                                                  Variables

Recurring                                                     Event Only

          Heterogrades                                            Homogrados               They meet the condition of being stationary, recurring, and almost all risks are heterograded, except life risk.

          Instead, the latter (which includes both the risk of dying and the risk of living) is a variable, single, and homogenous event.

          The characteristics of both risk groups are different, which motivates that the development of actuarial statistics and mathematics is different for life and non-life risks, including in this second group to everyone else.

              The technical difference between the two lies in the fact that the statistical bases to be used contemplate, in the case of variable risks, the time that the people or objects understudy has been exposed to the risk, while, in the case of stationary risks, this distinction does not it is necessary.

                    On the other hand, if the risk is a single event, it should be taken into account It takes into account that the person or object to whom the risk has occurred leaves the group or population exposed to the risk, while in the risks of multiple events it continues to be part of the group of people or objects exposed to the risk.

                                                           

                 Finally, if the risk is heterogeneous, that is, its occurrence can cause different economic damages, it is necessary to study and determine the probable average cost, which is not necessary if the risk is homogeneous.