As published in The Daily Times (Malawi) on April 24th, 2024
The cry for employment from our educated youths is a painful issue to parents and guardians. We do not know how you, dear reader, feel about it. There is nothing that tears our small hearts apart like seeing brilliant school leavers walking the length and breadth of the cities’ major streets unsuccessfully looking for employment.
While we talk about unemployment among our youths, something keeps us thinking – recently the country’s newspapers and social media were awash with reports concerning ten people that died in Blantyre and surrounding areas after they had taken illicit distil known as ‘ambuye nditengeni’(Lord take me). This distil, it has been established, is not certified for human consumption. Regrettably, the drink is popular among the youth. Kudos to men in uniform for arresting distillers-cum-sellers of the distil. All along, we have been taking man as ‘man.’ But we must confess that the image took a knock a couple of days ago when it was learnt that some people in town were in the business of selling cocktails with poison content. Man is both a risk and a hazard.
This brings us to today’s topic - the difference between risk, uncertainty, and hazard.
People and property are exposed to different levels of risks. Insurance people define risk as a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for.
Risk may also mean possibility of unfavorable result, following operation of an event. Some people use the term risk to mean uncertainty and vice versa. As far as insurance is concerned, this is wrong. Uncertainty refers to a situation where the result of an event can only be estimated but not predicted with precision. In view of this, uncertainty is notoriously a subjective phenomenon. It is based on a person’s own perception. This implies that uncertainty differs from one person to another.
When Talinda takes his car to Likoma Insurance Company for cover, he does not do so to insure it against uncertainty. No. He is insuring the car against risks. The case in point is that uncertainty is just a state of mind. It is incalculable and hence uninsurable. In most cases, uncertainty arises as a result of lack of knowledge on the part of an individual.
On the other hand, the word risk is often used to mean both the event and factors, which may influence outcome of a loss. For instance, when your insurers visit your house to conduct risk survey, they will look at two aspects of the risk. One - factors that will cause loss or damage to the house. Two - factors that will influence or propagate loss or damage to the house. We hope we are together this far. Insurance is not rocket science as some quarters have been led to believe.
Last year – 2023 - the country experienced pockets of fuel scarcity. We read in the newspapers that some people were insentiently keeping jerrycans of petrol inside their houses for sale on the black market. If the jerrycans had caught fire, consequently destroying the house and contents therein, we could not have said that petrol was the cause of the damage. No. The cause was fire. Availability of petrol in the house was just a factor that influenced occurrence of the event. From insurance’s point of view, fire is a risk and storage of petrol in the house, where hot works took place, was a hazard.
A hazard is, therefore, a factor that influences an outcome. It increases or decreases probability of a loss. In a lay man’s language, hazards are factors that affect severity and frequency of a loss or condition affecting a risk. Hazards are not themselves the cause, but they increase or decrease the effect, should a risk operate. Hazards are what prompt insurers to insure or not to insure your assets and what premium to charge you.
Insurers classify hazards into various categories. Physical hazards include those physical conditions that may aggravate probability of a loss or damage. Example of poor physical hazard is a slippery road. Moral hazards refer to increase in severity of loss, resulting from dishonesty or attitude of a person. Killing or trying to kill someone, deliberately, is a poor moral hazard - the attitude of vendors of ‘ambuye nditengeni’ distil in the second paragraph, above, is a typical example of poor moral hazard. Morale hazard emerges from an attitude of carelessness or indifference towards cause of a loss.
Views from the top are that we are losing the world that God created for us to protect and take care of, not because of ignorance, but due to sheer egocentricity. Insurers should live up to this challenge. Talk to us. We are here to serve.
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