RISK & INSURANCE

In our last issue we had published a thorough information about International Insurance Company, its position in the market and the services it rendered. And today we have decided to interview Khayal Mammadkhanli, Chairman of Supervisory Board of the International Insurance Company, and brighten up theoretical features of insurance and deal, first of all, with "risk" concept of the insurance, its crux.

Risk is the first basic concept of the insurance. What is meant when we talk about risk?

In literal translation the word "risk" means to take a decision the result of which is not predicted, to be more exact, to take a non-safe decision. Insurance risk is to be perceived in two meanings:

1. Insurance risk is a highly exact anticipation of the losses expressed mathematically on the bases of statistic data.

2. When we deal with insurance the insurance object itself, that is the thing insured should be perceived. In daily life when the people deal with insurance, they just mean the buildings, vehicles, cargo etc, i.e. the objects of insurance.

In our interpretation I'd like to deal with the first meaning of the insurance risk.

It is rather difficult to provide the insurance risk with a single and thorough definition, but let me try to list some of the possible definitions. A risk is a doubt bound to the outcome of the situation or Risk is an uncertainty whether there will be a loss or not, or a Risk is a case that cannot be predicted beforehand or Risk is an opportunity bound with the possible loss.

Let's cite the possible Risks we can encounter bound with the car we own.

1) the Risk of the car's future theft;

2) the Risk of traffic accident that can result by the drivers injury or without injury;

3) the Risk of injuring another person due to traffic accident;

4) the Risk of damaging the car on the part of other driver. The insured person can get insurance protection for all these Risks or for some of them.

Naturally, in daily life we are confronted with lots of risks. It is impossible to get insured for all of them. From this point risks are subdivided into 2 groups: the risks that can be insured and those that cannot be.

The Risks that can be insured are to have the following features:

In order the Risk can be insured it must have financial value (except life insurance) to be short, the damage can be seized by cash payment.

the insurance event must occur accidentally.

there must be insurable interest.

There must be homogenous risks (similar). It means, the insurance Risk should not be the only one for its peculiarity. The insured person (fi. in vehicle) should have as many insured risks as possible so as to have the information about the amount of possible approximate damage.

Insuring the risk must not contradict to public opinion. It is impossible to insure the person's liability for fines arising from the criminal acts done by that person.

The Risks that cannot be insured include the following:

Under non-financial Risks we perceive the risks the damage of which cannot be valued in cash. For instance, in buying a new house or in selecting a couple for marriage, or taking a decision in sending the children to a school.

Under speculative Risks we perceive the risks that are qualified as business risks, but in reality we perceive the risks bound to gamblinf or carrying some chance. These risks may have three possible results: either the loss (damage) or remaining at the same position or point As the people take the speculative risks for the sake of profits the insurers do not accept these risks. These kind of Risks can comprise marketing strategy (for instance, if a new type produce is brought to the market, it is impossible to insure its financial gains), business resolutions (for instance to build a new factory).

fundamental Risks are another type of Risks that cannot be insured. The Fundamental Risks are the risks derive due to reasons that remain aside from the control of a person or persons. The outcome of these risks usually embrace a wider sphere and the damage is catastrophically great. These kind of risks can emerge due to social, economic, political or natural reasons. Fundamental risks include economic recession, war, quakes, famine, etc.

Irrespective of the type and character of the Risks, any person can make use of various insurance services the International Insurance Company provides to preserve the stability and reliability in the daily life, naturally, if it is an insurable risk.