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Principles of Risk Management and Insurance, 13th Edition by Michael McNamara, George E. Rejda

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Definitions of Risk

There is no single definition of risk. Economists, behavioral scientists, risk theorists, statisticians, actuaries, and historians each have their own concept of risk.

Traditional Definition of Risk

Risk traditionally has been defined in terms of uncertainty. Based on this concept, risk is defined as uncertainty concerning the occurrence of a loss. For example, the risk of being killed in an auto accident is present because uncertainty is present. The risk of lung cancer for smokers is present because uncertainty is present. The risk of flunking a required college course is present because uncertainty is present.

Employees in the insurance industry often use the term risk in a different manner to identify the property or life ...

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