Page 15 - Insurance Surveyors Book Ebook IC S01

Survey And Loss Assessment IC-S01

insured is an act of sabotage and is therefore a criminal action. In case of human life,

even suicide, at least during the short period of one year, is beyond the scope of

insurance.

Such huge funds could not be made available but for the pooled resources of the

entire society. As we have said in the above example of the newspaper hawker, one

rupee contribution made it possible to have a fund of rupees one hundred. The risks

of the loss of the cycle for each hawker boy was too great to bear. But when the

hundred hawkers pooled their resources, they distributed their risks in bearable

proportion.

The aero planes cost hundreds of crores of rupees. Say there are one lakh aero

planes, and each one cost one hundred crore. If the probability of loss is ten aero

planes out of one lakh aero planes every year, then all that you need is the annual

contribution of one lakh premium from each aero- plane owner. The probable loss

would be 10 x 100 crore, divided by one lakh to each one contributing towards

premium.

The same theory of probability applies to life insurance also. Let us say we insure

1000 people, all are say of 20 years of age. The insurer's previous experience tells

him that at this age, only 4 out of 1000 are likely to die within one year. Now

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