Question

Write notes very brief comment on the Insurance is nothing but risk transfer.

Answer 1

Risk is born out of uncertainty and it is inseparable from business. Business risks cannot be eliminated, but they can be controlled to some extent by adopting appropriate measures. Transferring the risk to another party is a very widely followed approach to handle risks. Insurance is the most common method of transferring pure risks such as fire, windstorm, flood, riot, theft, etc.

Business enterprises normally transfer the pure risks to the insurance company and devote their full efforts to their normal business. Insurance is a device by which a loss likely to be caused by uncertain event is spread over a large
number of persons who are exposed to it and who voluntarily join to insure themselves against such an event.