The Cost of Risk and the Concept of Risk Partnership

Abstract

A recent survey in UK has highlighted the large discrepancy between the insured and uninsured costs of losses, demonstrating that the true cost of risk is much higher than previous estimates. Risk is never totally transferred by insurance, and if insureds recognise that they retain a partial ownership of the risk there is a greater likelihood that there will be better loss control. The paper promotes the concept of "risk partnership" as a more correct representation of the contract between insurer and insured than the more generally used term of "risk transfer".