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Introduction

CONTENTS: Introduction 5 I. Insurance as a risk transfer mechanism 6 Identification of the risk 6 Risk evaluation 6 Process of risk management 7 Common pool principle 8 II. Benefits of the insurance to: 9 Individuals 9 Businesses 10 Communities 10 Conclusions 11 References 12 Introduction Hello everyone! Today we are going to talk about insurance. Our session will be split in two parts. Firstly, we are going to achieve a basic understanding what is an insurance by getting familiar with the following set of ideas like: risk, identification of the risk, risk evaluation, risk management process, common pool principle. Second part of our discussion will be dedicated to analyze the benefits insurance provide to us - individuals, to businesses and to our society as a whole. So let's begin! Now try to remember the last time you or your parents were buying something at "Carphone Warehouse", "PC World" or "Argos". And then suddenly a weird thing happened: the person at the till asked a question: "Would you like an insurance with this item?" What was your parents' reaction? Or maybe recently you were buying something online on eBay? Do you remember at the checkout point there was an option to tick a box called "postage insurance"? And do not worry if your answer to my previously asked questions is "no" and you do not have a clue what the insurance is all about. ...read more.

Middle

So as you see people have agreed to use certain words like elimination or reduction when they talk about physical risk management and now you too understand meaning of these terms. So far so good? Fantastic!:) Let's move on! As you already know we can manage the risk not only physically but also financially! So if you are a forward looking person and retain some of your pocket-money in your piggy bank (in case something bad happens to you mobile phone so you can buy a new one straight away). That is a one way of financially managing the risk. Another way is when you transfer the financial consequences of the risk occurring. That is where insurance comes in. So people transfer the risk of losing or damaging their mobile phone to insurance companies which are taking that risk. How it works in practice? Imagine you know, that there is always one person in you class who loses the mobile phone in a year. But as we stated previously because of the unpredictability of risks nobody knows who will be unlucky this year. So thirty of you decide to pay �10 each and collect a pool of �300. These money will be paid out to that person who's mobile phone will be lost, damaged or stolen. ...read more.

Conclusion

When businesses know insurance financially protects them against many forms of risk it impels innovation and brings ultimate development to communities. Moreover by creating common pool, security and peace of mind, by reducing the severity of losses, when the vast funds of money are invested for the prosperity of the economy and the country is relieved from financial burden to compensate the victims of loss all that shows how beneficial the insurance is to communities. Conclusions To summarize today you became familiar with the definition of a risk, what does it mean and how you deal with it in your daily life. Then we identified and examined there stages of risk management process which are: risk identification or being aware a risk; second stage was risk evaluation and finally actual risk management. We also analysed the ways of managing the risk. Now you are aware that the two ways physically managing the risk are avoidance and reduction. When we manage risk financially we can go with retention of transferring the risk of financial loss. Here is where insurance comes in. The first part of presentation was finished by getting familiar with common pool principal. Second part of our presentation was dedicated to look at more practical aspects of insurance especially the benefits it provides to individuals, businesses and societies. The bottom line is insurance cannot protect you against something bad happening. However what insurance does is protects against potential financial loss and that is the key message to take. ...read more.

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