(b). Insurability of Risks:
Not all risks are insurable. To be insurable, a risk must satisfy the following main criteria:
(i)
The probability of a loss in the future, should lend itself to estimation. This is possible only if reliable data of losses, is available fora sufficiently long period in the past.
(ii) The loss must be capable of being estimated in financial terms.
(iii) The probability of occurrence should not be too high, to make insurance unaffordable
(iv) Occurrence of an event, or the damage it causes, should not be affected by the insured’s behavior (Moral Hazard)
(v)
To the extent possible, the risk should bean Independent Risk’.
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