Page 288 - IC38 GENERAL INSURANCE
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Example
A fire in the plant of a large multinational company at Gurgaon destroys
inventory worth Rs 1 crore. The loss is heavy but not so high as to lead to
bankruptcy.
A major kidney transplant operation whose cost is prohibitive.
iii. Marginal/Insignificant
Where the possible losses are insignificant and can be easily met from an
individual or a firm‟s existing assets or current income without imposing any
undue financial strain.
Example
A minor car accident results in the side being slightly grazed due to which some
of the paint is damaged and a fender is slightly bent.
An individual suffering from common cold and cough
b) Nature of risk environment
Another basis for classifying risks is by the nature of the environment.
i. Static risks
Static risks refer to events taking place within a stable environment. They
have a regular pattern of occurrence over time and can be reasonably
predicted. They are thus easier to insure. Typically such risks are caused by
natural events.
Examples are fire, earthquake, death, accident and sickness.
ii. Dynamic risks
Typically refer to perils that affect the social environment and result from
economic and social factors. They are called dynamic because they don‟t
necessarily have a regular pattern of occurrence and cannot be predicted
like static risks. Again these risks often have vast national and social
consequences and may affect a large section of people.
Examples are unemployment, inflation, war and political upheavals.
Insurance companies in general do not insure dynamic risks.
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