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Acts of God and ManRuminations on Risk and Insurance$
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Michael Powers

Print publication date: 2014

Print ISBN-13: 9780231153676

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231153676.001.0001

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Aloofness and Quasi-Aloofness

Aloofness and Quasi-Aloofness

Defining Insurance Risks

Chapter:
(p.93) 6 Aloofness and Quasi-Aloofness
Source:
Acts of God and Man
Author(s):

Michael R. Powers

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231153676.003.0006

This chapter begins with a brief history of insurance followed by an overview of the types of products sold by insurance companies (property-liability insurance, life-and-health insurance, and accident-and-health insurance). It then distinguishes between the “aloof” and “quasi-aloof” risks of insurance and the “non-aloof” risks of other financial services markets. To this end, it considers a theoretically exhaustive set of financial random processes and defines aloof and quasi-aloof random processes as special subsets of this original set that can influence all financial random processes as they propagate through time, but are themselves relatively immune to the effects of non-aloof random processes. Risks are then defined as the random fluctuations in the various underlying processes at a given point in time. After showing in some detail that conventional insurance products are generally based upon aloof and quasi-aloof risks, the chapter explores the usefulness of the aloof risk/non-aloof risk dichotomy in the context of relevant applications.

Keywords:   insurance market, insurance companies, insurance policies, aloof risks, quasi-aloof risks

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