Mastering Risk Management: Strategies for Insurance and Loss Mitigation

Fire Insurance: Understanding Risks and Coverage

In insurance policies against fire, the risks and losses insured against typically cover all losses or damages caused by fire. However, similar to marine insurance cases, coverage may be limited based on the items insured or the cause of the accident. Many policies specifically exclude fires caused by a mob or enemies of the commonwealth. Furthermore, the policy's own provisions limit its duration.

Essential Risk Management Strategies

Risk Avoidance

While it is often impossible to completely avoid risk, the possibility should not be overlooked. For example:

• During a severe blizzard, a Car Fleet may choose not to release vehicles for travel until the weather clears, thereby avoiding the risk of auto accidents during severe weather.
• If certain areas of campus buildings have repeated water problems, avoiding the storage of supplies in those areas can prevent water damage claims.

Risk Retention

It may be determined that retaining a risk is more practical, even when other risk handling methods are available. For instance, a University might retain the risk of loss related to structures like fences, signs, parking meters, gates, and light poles due to the difficulty of enumerating and evaluating all such structures. When losses occur, the cost of repairs is absorbed by the campus maintenance budget, unless costs can be recovered from a negligent third party.

Loss Prevention and Reduction

When risk cannot be avoided, the effect of loss can often be minimized in terms of frequency and severity. Examples of these strategies include:

• Encouraging the use of security devices on all computers to reduce the risk of theft.
• Requiring students studying abroad to purchase health insurance. This helps them avoid the risk of financial difficulty should they incur medical expenses in another country.

Risk Transfer

In some cases, risk can be transferred to others, typically through a contract. Two common examples are:

• When outside organizations use University facilities for public events, they are required to provide evidence of insurance and name the University as an additional insured under their policy, thereby transferring the risk from the University to the user.
• The purchase of insurance itself is a form of risk transfer, as the policy contractually shifts the financial risk of loss from the insured entity to the insurance company.