What Is an Insurable Risk?

Insurable risk is the risk that the insurer can accept underwriting.

Insurable risk

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Insurable risk is the risk that the insurer can accept underwriting.

Insurable risks are those that meet the insurer's underwriting conditions.

Risk is a prerequisite for the emergence and existence of insurance

There is no insurance without risk. The process of insurance generation and development shows that insurance is based on the existence of risks and

Insurance act

Higher loss

Small potential loss

The above five conditions of traditional insurable risks are in line with the connotation of insurance and the principle of underwriting. In other words, it is correct and unjustifiable to use the current insurable conditions as a measure of risk insurability. However, the practice of modern insurance operations has challenged and challenged the traditional insurable risk conditions; in order to meet the growing insurance demand, not only in terms of total volume but also in structure, it is necessary to expand insurance business, expand insurance supply, and make insurable The connotation and extension of risk have undergone certain changes, some new situations have emerged, and some new problems have arisen. It is necessary to think rationally about the actual conflict of traditional insurable risk conditions.

First, traditional insurable risk conditions conflict with the risk environment in which modern insurance operations are located. With the development of the economy and the advancement of science and technology, the risk environment in which modern insurance business operates presents some new features, including the increased frequency of risk losses, the expansion of the scope of losses, and the increase in the scope of losses. The increase in insurance demand for the insured target has accordingly required insurance companies to relax their underwriting conditions, not only in terms of total volume, but also structurally expand insurance business and expand insurance supply. In the actual operation of insurance, if the insurance company strictly conducts risk identification, risk screening, and risk underwriting based on each content of traditional insurable conditions, the insurance company will lose a large number of risk documents.

Insurable risk

The result may not only be the weakening of risk units and the instability of insurance operations, but also the credibility of insurance companies, inhibit or undermine the full play of the positive role of insurance, and reduce the important role of insurance in society and the economy.

Second, the idealization of traditional insurable risk conditions conflicts with the practicality of actual insurance operations. Traditional insurable conditions require that the risk units underwritten by the insurance public have a large number, homogeneity, and independence. Objectively, there is no absolute homogeneity in the risk units that the insurance company underwrites or is about to underwrite. , Location, internal structure and use will be different to varying degrees, which determines that their respective frequency and magnitude of possible losses will vary. Furthermore, the random nature of risk determines that insurance companies cannot fully control and control it, even for insured risks. Objectively, we cannot completely avoid possible catastrophe losses caused by excessively concentrated chain reactions in time and space. It is even more difficult to avoid one-time huge losses caused by unusually severe, widespread natural disasters and major accidents. Therefore, the homogeneity and independence requirements in insurable conditions are a harsh condition that insurance companies can almost never do. Therefore, mass is also a vague and relative concept. Depending on the size of the company, the specific conditions of mass can only be a sufficient condition.

Furthermore, traditional insurable risk conditions conflict with the development of modern insurance business technology. One is the continuous improvement and development of risk and risk management theories, and the widespread application of new risk management technologies, making theoretical and technical preparations for insurance companies to underwrite high-risk and high-tech risks; the second is the establishment and improvement of reinsurance and its system And developed, financial arrangements have been made for insurance companies to appropriately relax underwriting conditions. An insurance company can pass on the risk responsibilities beyond its own ability to the reinsurer, so that its distribution of compensation can be modified, the possibility of over-compensation occurring can be reduced, and its own operations can be stabilized. The accumulation and growth of three insurance reserves have prepared funds for insurance companies to withstand catastrophes and losses.