General insurance Measurement of Risk

[Mataracy]

Before any body or insurance company accepting to take up risk many things have to be put in to consideration.
In measuring risk, we place some values on our belief as to the likelihood that some events will or will not occur .
Risk measurement however , can be looked at in the following ways:

i. Frequency and Severity
People may tend to refer yo an event as risky or not too risky and in this wise, give some indication if their own degree of belief .

ii. Description and inference.
In measuring the frequency and Severity of future evens we come in contact with the word statistics and the whole statistical concept can br divided in to two broad areas.

(a) A priori
In probability, when the total number of possible events is known, then we compare this with number of desired events to calculate a priori probability but in real word, the number of possible events is not always known and therefore limits the application of a priori probability.

(b) Relative Frequency
One problem of measuring risk in the practical sense of it is that the total number if possible outcomes is unknown.

(c) Subjective probability
In certain cases there will be a total absence of past experience or very few cases of such events have occurred. This renders or makes difficult future forecast based on experience.

(iii) psychological Aspect
The problem of measurement jf risk caused by the lack of past statistical experience could br regarded as only one aspects ct of the complex problem. Another important aspect is what is regarded as psychological problem which is the measurement of risk dye to attitude of mind which different people have to the same situation. What some people .right consider important might be relatively insignificant in the eyes of others.

 

[btaliat]

Nice information. In fact, most people always have their own notion about any insurance policy. For instance, someone that eats balance diet, involve in regular exercise and always engage in good and sound sleep will see health insurance as insignificant because there is low of no probability of falling sick.

 

[Mandy96]

Yeah I don’t think it is wise enough to take risk without some assurance of reward. As they say, no risk no reward. Those are actually necessary to be put in place for proceeding to take such risk. Insurance is important to some people though. But I’ll suggest you think it through before going for it.

 

[Wisdom01]

Yeah the insurance company measures the risk through different means and aspect ,I think actually most make use of the cost and value of the asset ,the risk for it to be proned to the risk he or she is insuring against and so many other factors that needs to be considered