Four Conditions for Insurable Risks
A risk which is insurable satisfies four conditions
- homogeneous
- insurer needs enough similar risks to estimate the claim costs using the law of large numbers
- fortuitous
- occurrence and severity must be beyond the control of the insured
- definite loss
- in time and amount
- otherwise how can the benefit be determined?
- noncatastrophic
- otherwise impact would be immeasurable
- eg, exclusions for war
page revision: 2, last edited: 04 Jul 2007 04:04