Question

2. Compare the risks of (i) fire with (ii) theft, in terms of how well they meet the requirements of an ideally insurable risk.

Answer 1

The risks of fire and theft meet the requirements of insurable risks as they are covered by insurance policy and insurance companies cover the losses due to these risks.

In case of risk of fire, the insurance company charges premium based on the structure,size and type of built of property covered and its contents. The premises of the property being insured from fire also need to have fire protection equipment as it affects premium charged as part of the insurance policy. The losses due to fire are covered depending on the value of the loss or the risk cover provided by policy whichever is lower.

The insurance against theft is to cover the unlawful takeover of property belonging to another person. It is also an insurable risk as the company provides insurance depending upon on the value of property. Insurance companies also provide fidelity bonds to companies to get risk cover from the losses of theft done by their employees. It can be blanket cover including all employees and the insurance companies pays the amount as per the losses covered by the policy.