Risk Management is emerging as an important area of insurance. The insurer succeeds if he is able to manage the risk properly. They maybe insurance or un-insurable. Insurer transfers the risks to reinsurance companies. The risk is uncertainty or loss of profit. It may arise because of hazards in routine business and dynamic functions. Let’s know what is risk management insurance.
What is risk management insurance?
The risk may be financial and non-financial. Business risks and individual risks are also insured. Business risks include profit, price, credit, and other risks. Personal risks include property risk and liability risk.
Risk management involves loss control, loss financing, and risk reduction. Loss control is a loss prevention method that reduces the frequency of loss. Control devises to prevent loss are installed on a property to prevent fire.
Loss financing is done through retention, insurance hedging, and risk transfers. Risk reduction is possible through better forecasts and diversification.
The risk is uncertain of loss or profit. If a business enterprise is not managing the potential risk, it may suffer incredible loss. The insurance industry ensuring risk has to be very particular about risk management.
The need and objectives of risk management, risk identification, principles of risk management, and strategies of risk management and functions of important association of risk management will illustrate how to manage risk effectively.
Need and Objectives
Risk management is essential to prevent financial disasters and achieve the objectives of capital management. The success must be sustainable, for which risk has to be prevented and managed.
The aspirations of insurance customers can be easily met if the risk is properly managed. It helps right things performances and assists in carrying out the duties of care, loyalty, and good faith. The competition is beaten over by proper planning of risks.
The shareholder’s stake will remain intact if the risks are systematically managed. Many times policyholders and shareholders have competing interests. The insurer has to balance them. The development and solvency requirements are contradictory, sometimes.
The disclosures, transparency, and performance have become routine functions of insurance. The investor, suppliers of inputs, and marketing management have credibility. Their interests should not be deluded in the organization.
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