The insurer and an insurable risk

Insurance relies heavily on the “law of large numbers.” In large homogeneous groups of population it is possible to estimate the normal frequency of common events such as deaths and accidents. Losses can be predicted with reasonable accuracy, and this accuracy increases as the size of the group expands. From a theoretical standpoint, it is possible to eliminate all pure risk if an infinitely large group is selected. From the standpoint of the insurer, an insurable risk must meet the following requirements: 1. The objects to be insured must be numerous enough and homogeneous enough to allow a reasonably close calculation of the probable frequency and severity of losses. 2. The insured objects must not be subject to simultaneous destruction. For example, if all the buildings insured by one insurer are in an area subject to flood, and a flood occurs, the loss to this insurer may be catastrophic. 3. The possible loss must be accidental in nature, and beyond the control of the insured. If the insured could cause the loss, the element of randomness and predictability would be destroyed. 4. There must be some way to determine whether a loss has occurred and how great that loss is. This is why insurance contracts specify very definitely what events must take place, what constitutes loss, and how it is to be measured.

VII. Agree or disagree with the following statements.

1) The objects to be insured must be small in numbers and heterogeneous to estimate the probable frequency and severity of losses. 2) The insured objects must be subject to simultaneous destruction. 3) The possible loss must be non-random in nature. 4) The possible loss must be within the control of the insured. 5) If the insured could cause the loss, the element of randomness and predictability would be completely useless. 6) The insured must be morally, legally, or officially allowed to cause the loss. 7) If the insured causes the loss, he has to repair a damage on his own account. 8) Insurance contracts state in an exact and detailed way what events must pass, what forms loss, and how it is to be estimated.

VIII. Translate the following words and phrases from Russian into English.

Слои общества; подверженный; одновременный; разрушение; наводнение; происходить; случайный; вне; вызывать; случайность; предсказуемый; определять; оценить; предсказывать; разумный; расширяться; исключить; бесконечно; страхуемый риск; могущий быть предметом страхования; точка зрения; требование; многочисленный; однородный; разумно; частота; большие убытки; точно определять; определенно; составлять; измерять.

IX. Complete the following statements. Retell the text “The insurer and an insurable risk”.

1) Insurance relies … 2) It is possible to estimate … 3) Losses can be … 4) Reasonable accuracy increases … 5) It is possible to eliminate … 6) The objects to be insured must be … to allow … 7) The insured objects must not be … 8) The possible loss must be … 9) The element of randomness and predictability would be … if … 10) There must be some way … 11) Insurance contracts specify very definitely …

Виды страхования. Страхуемый риск.

Study the words and the word-combinations.

groups of population - слои общества;

reasonable ['ri:zǝnǝbl] - разумный;

expand [ɪks'pænd] - расширяться;

eliminate [ɪ'lɪmɪneɪt] - исключить;

infinitely ['ɪnfɪnɪtli] - бесконечно;

insurable [ɪn'∫uǝrǝbl] risk - страхуемый риск;

insurable - могущий быть предметом страхования;

numerous ['nju:mǝrǝs] - многочисленный;

homogeneous [hɔmǝu'dʒi:njǝs] - однородный;

severity [sɪ'verɪti] - жестокость;

severe [sɪ'vɪǝ] losses - большие убытки;

occur [ǝ'kǝ:] - происходить;

catastrophic [kætǝ'strɔfɪk] - катастрофический;

accidental - случайный;

randomness ['rændǝmnɪs] - случайность;

predictable [prɪ'dɪktǝbǝl] - предсказуемый;

specify - точно определять;

constitute - составлять

excessive [ɪk'sesɪv] - чрезмерный;

insurance adjuster - оценщик размера страхового убытка;

severe losses - большие убытки;

financial hardship [faɪ'næn∫ǝl 'hа:d∫ɪp] - финансовые трудности;

windstorm ['wɪndstɔ:m] - буря;

burglary ['bǝ:glǝri] - ночная кража со взломом;

legal liability ['li:gǝl laɪǝ'bɪlɪti] - юридическая ответственность;

occupancy - владение;

competitive [kǝm'petɪtɪv] - конкурирующий;

insurable - могущий быть предметом страхования;

draw - составлять;

premium - страховой взнос;

bonus - премиальная надбавка;

whichever - какой бы ни;

marine - морской;

vessel - корабль;

cargo - груз;

freight revenue - выручка от перевозки грузов;

legal liability - юридическая ответственность;

negligence - небрежность;

shipper - грузоотправитель;

carrier - транспортная компания;

liability insurance - страхование ответственности;

conduct - ведение;

applicable - применимый;

aviation - авиация;

physical damage - материальный ущерб;

insolvency - неплатежеспособность;

disability - нетрудоспособность.

І. Read and translate the text.