• Indemnification. Indemnification means that the insured is restored to his/her approximate financial position before the occurrence of the loss.
• Payment of fortuitous losses. A fortuitous loss is a loss which occurs as a result of chance. In other words it is accidental.
• Risk transfer. This means that the pure risk is transferred from the insured to the insurer, who typically is in a stronger financial position to pay for losses than the insured.
• Pooling of losses. Pooling is the spreading of losses incurred by the few over the entire group, so that the process average loss is substituted for actual loss. Pooling involves the grouping of a large number of exposure units so that the law of large numbers can operate to provide a substantially accurate prediction of future losses.
skilled writter answered the question on May 1, 2018 at 16:11
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