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Insurance Laws and Practices

Notes (c) Financial and Non-financial Risks: There are several risks in life, which have little or no
financial consequences. But insurance is concerned with indemnifying only losses arising
from financial risks.
(d) Fundamental and Particular Risks: These are a group of risks which are caused by economic,
social and political factors. They affect large segments of the population. Some examples
are floods, war, inflation, earthquake, etc.
They are uncontrollable and are considered to come under social insurance. However, some
risks like earthquake are covered by commercial insurance companies.
Particular risks involve losses that happen to individuals and may be dynamic or static.
Destruction of a house by fire and robbery of a bank are particular risks and hence, are insurable.

Self Assessment

Fill in the blanks:
1. The risk must involve a loss that is capable of financial ………………………..
2. The …………………….. and ……………….. of any risk must be completely beyond the
control of the person taking the insurance.
3. All pure risks are insurable but …………………….. risks.
4. ………………….. risks have nothing to do with changes in the economy.

2.2 Types of Risk

You need to know how the risks affect individuals and the different types of risks which a person
and his organization face. Risks can be further classified in the following manner also:

Figure 2.1: Types of Risks

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