FIN725 GDB 2 Solution and Discussion
Risk Management is a process in which loss exposures are identified and an appropriate technique is selected for treating such exposures. A loss exposure is a situation in which a loss is possible regardless whether this loss occurs or not. Insurance is an effective tool for treating loss exposures with low probability of loss but having high severity of loss. However some people argue that harms of insurance exceed its benefits due to the various costs associated with it.
Being a student of Credit and Risk Management (FIN725), you are required to give your opinion on this issue. Whether benefits of insurance are more than the costs associated with it or not? Elaborate your answer by writing various benefits of insurance and costs associated with it.