Which of the following is considered an element of insurable risk?

The choice of measurable and identifiable risks as an element of insurable risk is rooted in the principles of insurance and risk management. Insurable risks must be clearly defined and quantifiable to allow insurers to assess the likelihood of the risk occurring and the potential financial impact. This measurability enables insurers to set appropriate premiums and determine coverage limits, allowing for the creation of a stable insurance product.

When risks can be accurately measured and identified, it helps in establishing a statistical basis for underwriting and claims management. Insurance operates on the law of large numbers, where the predictability of events can be derived from statistical means. This ability to define and quantify risks fosters a reliable framework for both insurers and policyholders.

In contrast, elements such as high-frequency occurrences or risks that only affect a few individuals are generally excluded from being insurable, as they can create unpredictability and financial instability for insurance providers. Unpredictable outcomes further complicate the assessment of risk, as they would make it virtually impossible to form a reliable basis for underwriting and calculating premiums. Therefore, the focus on measurable and identifiable risks is central to the concept of insurable risk in the field of insurance.