INSURANCE PROGRESS

15. The mechanism of insurance is very simple people who are exposed to the same risks come together and agree that it any one of htem surer a loss the others will share the loss and make good to the person who lost. All people who send goods by ships are exposed to the same risks. Which are related to water damage sinking of the vessel piracy etc. those owning factories are not exposed to these risks.fire hailstorms earthquakes. Llike this different kings of risks can be identified and separate groups maden including those exposed to such risks. By this method the heavy suffer such losses at the same thime is divided into bearable small losses by all the others in the group. In other words the risk is spread among ther community and ther likely big impact on one is reduced to smaller manageabnle impacts on all. Insurance helps to spread the costs on risks.
16. if a jumbo jet with more that 350 passenger crashes the loss would run into several crores of rupees. No airline would be able to bear such a loss. It is unlikely that many jumbo jets will crash at the same time. If 100 airline companies flying jumbo jets come panies flying jumbe ojets come together inro an insureanc3e pool when ever one of the jinbo jets come together in to an insurance pool whenever one of the jumbo jets in the pool crashes the loss to be borne by each airline would come down to a few lakhs of rupees .thus insurance is a business of sharing. It makes an unbearable loss.bearable….
17. there are certain principles whick make it possible for insurance to remain a preferred and fair arrangement. The first is that it is difficult for any one individual to bear the consequences of the risks that he is exposed to. It will become bearable when the community shares the burden./ the second is that the per8l should occur in an accidental manner. Nobldy should be in a position to make the risk happened. In other words none in the grup should set fire to his assets and ask other to share thate loss. This wold be taking unfair advantage of any arrangement put into place to protect people from the accidental risks they are exposed to. The occurrence has to be random accidental and not the deliberate creating of the insured person.
18. the manner in which the loss is to be shared can be determined beforehand. It can be equal among all. It can also be proportional to the risk that each person is exposed to. The trader who has sent rs. 100 lacks worth of goods on a ship will bear double ther loss to be borne by another trader who has got rs.50 lakhs worth of goods on the same ship. Current practice is to make the sharing proportional to the exposure to risk. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance at the time of admission to the grop. Insurance companies

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