This document provides an overview of business risks and insurance. It defines business as any human activity engaged in to earn a profit. It discusses different types of risks businesses face like pure risk, economic risk, human risk, and natural risk. Insurable risks are those that meet insurance criteria for coverage, while uninsurable risks are too high risk. Controllable risks can be minimized, while uncontrollable risks cannot be prevented or reduced. The document also outlines methods to reduce risk like efficient management, maintaining a cash reserve, and shifting risks to insurance. It defines insurance and discusses principles of insurance like utmost good faith, indemnity, proximate cause, and mitigation of loss. Finally, it discusses factors that influenced

2. BUSINESS RISKS AND
INSURANCE
BY
ANAM RAFIQUE, NAILA RAFIQUE,
FAIZA JAMIL, NOOR-UL-AIN, IRAM SHAHZADI
AND
UZMA BATOOL

3. DEFINITION OF BUSINESS
According to James
Stephenson,
“Every human activity which is
engaged in for the sake of
earning profit may be called
business”.

4. • Risk – the possibility of loss
or injury
• Business risk – risk of loss that is
naturally incurred by owing and
operating a business

5. • Insurable vs.
uninsurable risk
• Controllable vs.
uncontrollable risk

6. Insurable risk
 Meets an insurance
company’s criteria for
coverage.
For example,
 Property insurance
 Vehicle insurance
Uninsurable risk
 Unacceptable to
insurance carriers
because the likelihood
of lose is too high.
For example,
 Owners of shops in
flood zones might have
difficulty in finding
insurance

7. CONTROLLABLE UNCONTROLLABLE
 Occurs when conditions can
be controlled to minimize the
chance of harm.
 For example
 Environmental damager can
often be prevented.
 Cannot be reduced or
prevented.
 For example
 The risks of doing business
in a global market place
cannot be controlled.

8. Pure risk
Economic
risk
Human
risk
Natural
risk
OTHER TYPES OF RISK

9. PURE RISK
o Threat of loss with no opportunity for gain
Examples
Employee theft
Burglary
Bad checks
Accidents
Involving Customers or employees

10. Occurs when there is
likelihood of financial loss
May result from changes
in overall business
conditions

11. EXAMPLE
If a competitor offers
more features, other
businesses need to
change their product or
face losses

12.  Risk of harm caused by human mistakes,
dishonesty or other factors attributed to people

13. Customer dishonesty
Fraudulent payment
Theft incompetence of employees

14.  The possibility of a catastrophe caused by
natural elements that can cause damage
of loss or property
Natural risk

15. EXAMPLE
 Floods
 Tornados
 Hurricanes
 Fires
 Lightning
 Droughts
 Earthquakes etc.

16. Reducing or
eliminating
the risk
Efficient
management
A reserve
cash
Shifting of
risks

17.  There are certain risks that can be
completely prevented by proper
arrangements and management

18. • Refrigeration can eliminate risk of spoilage
• Good labor-management relations can prevent labor
unrest
• Use of electronic cameras can reduce the risk of
shoplifting
• Industrial machines can be so designed as to prevent
accidents

19. Efficient management at all levels
can greatly reduce the hazards of
by:
 identify forms of risk
giving solution of risk
Efficient management

20. A RESERVE CASH
Reserve cash is a planning for unexpected
Planning for unexpected can save a business
Reserve cash is maintain to meet emergency
It saves business from financial loss

21.  Risk is shifted when another
person undertakes to bear
the loss
• Shifting of risks to other agencies
which specialize in bearing in
bearing that risk
• Insurance is the best method
of handling business risk

23. Contract between two parties
Process of collecting money
Compensation to losses

24. According to Oxford Dictionary,
“Insurance means undertaking, by a
company, society or the state to
provide safeguard against loss,
provision against sickness, death, etc.
in return for regular payments.”

25. MAIN POINTS OF DEFINITION
 An undertaking
 Safeguard

26.  Peace of mind
 Aversion of risk
 Protects mortgaged properties
 Provides self dependency
 Tool of savings
 Tool of investment

27. • Reduce reserve requirements
• Capital freed for investment
• Reduction of uncertainty
• Loss control activities
• Business and social stability

28. Benefits of insurance to society
 Protects wealth of country
 Helps in economic growth
 Control inflation

30. PRINCIPLES OF INSURANCE
• Utmost good faith
• The principle of indemnity
• Proximate cause
• Mitigation of loss
• Cancellation

31. Contract between insured and insurer
Both parties should disclose all facts to each
other
A false information or non disclosure of material
facts makes the contract invalid
Utmost good faith

32. All insurance contracts, except life
insurance are the contract for
indemnity
The assured shall be
compensated in case of loss only
The insured is not allowed to
receive a higher amount than the
amount of loss

33. An insured person can recover the loss only when
it is caused by any of the risk insured against.
Proximate cause

34. Mitigation of loss
• Insured should take all reasonable
steps to minimize the amount of loss
• He can recover the same from
insurer if he suffer loss in doing so.
• If he does not take care, his claim
might be lost

35. Both parties have right to cancel or
terminate the insurance before its expiry
date
Their relationship come to an end on the
date of cancellation of policy
CANCELLATION

38. Life insurance
 We can define life insurance
as a contract in which
insured person pay regular
premium to the insurer i.e.
insurance company

39.  On the death of the insured or at the maturity
period, the insurance company pay the
compensation or the matured sum respectively

41. • This insurance is done by businesses for
safety delivery of goods, while
transferring goods from one place to
another by sea way, land way, air way

42.  Fire insurance is an
insurance that cover
property such as home,
shop and other fixed asset
protection against fire, burn
etc.
 It also cover distraction of
property due to fire

43. Which companies provide insurance in Pakistan
• Adamjee insurance company limited(Karachi)
• Alpha insurance company limited (Karachi)
• Fins insurance company limited
• The united insurance company of Pakistan ltd
• Asia insurance company limited
• Premier insurance company limited
• Reliance insurance company limited
• Universal insurance company limited

45. Economic
Backwardness
Poverty
Illiteracy
Religious
beliefs
Trend of
Insurance

46. Economic backwardness
 Lack of resources
 Limited scope of business activities
 Lack of professional management

47. Poverty
 Lack of savings
 Basic needs of life

48. Illiteracy
O Illiterate majority
O Ignorance
O Views of people

49. Varying opinions of religious
scholars
Deep attachment to scholars
People considered it to be a form of
Riba
RELIGIOUS BELIEFS

50. TREND OF INSURANCE
No foresightness
Legacy of people

51. Our visit
 To
state life insurance company limited

52. ANY QUESTION