Page 283 - IC38 GENERAL INSURANCE
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A. Elements of insurance
We have seen that the process of insurance has four elements
Asset
Risk
Risk pooling
Insurance contract
Let us now look at the various elements of the insurance process in some detail.
1. Asset
Definition
An asset may be defined as „anything that confers some benefit and has an
economic value to its owner‟.
An asset must have the following features:
a) Economic value
An asset must have economic value. Value can arise in two ways.
a) Income generation: Asset may be productive and generate income.
Example
A machine used to manufacture biscuits, or a cow that yields milk, both
generate income for their owner. A healthy worker is an asset to an
organisation.
b) Serving needs: An asset could also add value by satisfying one or a group of
needs.
Example
A refrigerator cools and preserves food while a car provides comfort and
convenience in transportation, similarly a body free of illness adds value to
oneself and family also.
b) Scarcity and ownership
What about air and sunlight? Are they not assets?
The answer is ‗No‘.
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