Page 56 - RISK Management IC86 Ebook
P. 56
Risk Management
Advantages of insurance in handling risks
n Although insurance is only one of the techniques available
for dealing with the pure risks that the individual or the
firm faces, many of the risk management decisions boil
down to a choice between insurance and non-insurance.
The following benefits flow out of the mechanism of
insurance:
n Reduction of uncertainty: The insurance transfers financial
consequences of loss to the insurer, who then becomes
responsible for compensating the insured for the loss and
providing other loss related services according to the
provisions of the insurance contract. This is expected to
reduce the insured's anxiety and uncertainty.
Loss Control
n After insuring the various risks of the organisations, insurance
companies take interest in controlling the losses by providing
loss reduction education and advice by trained experts, which
result in lesser losses even in cases where losses have occurred.
Indemnification
n The direct advantage of insurance is indemnification for
unexpected losses. Organizations / Individuals suffering loss
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