Definition of Insurance
There is no single definition of insurance. Insurance can be defined from the viewpoint of several disciplines, including law, economics, history, actuarial science, risk theory, and sociology. But each possible definition will not be examined at this point. Instead, we will examine the common elements that are typically present in any insurance plan. However, before proceeding, a working definition of insurance—one that captures the essential characteristics of a true insurance plan—must be established.
After careful study, the Commission on Insurance Terminology of the American Risk and Insurance Association has defined insurance as follows.1 Insurance is the pooling of fortuitous losses by transfer of such risks to ...
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