Page 203 - RISK Management IC 86

The Insurance Times

(b) Risk Handling Costs and Loss Costs - Any action
taken to identify, evaluate and handle risks always
incurs some costs called risk handling costs.
Insurance premiums, charges for loss prevention
devices, fees for consultancy services are some
examples of readily identifiable risk handling costs.
There are some opportunity costs too, like
management and staff time spent on dealing with
risks. Also, the cost of avoiding a risk may be a loss
of revenue with due to discarded opportunity.

Loss producing events frequently results in both direct
and indirect costs. For e.g, the direct costs to a form of
industrial accidents include the compensation payable
the insured employees, any damage to machinery,
equipment and work in progress, loss of production
directly attributable to the accident, and accident
investigation expenses.

Besides such direct costs, thereby also indirect costs
attribute table to a loss producing events. For e.g, in an
industrial accident, if an worker is severely injured, not
only is there likely to be some loss of production from
the machine he was operating, but other employees might

Website: www.bimabazaar.com Call: 033-22184184 / 40078428 204

Copyright@ The Insurance Times. 09883398055 / 09883380339