Causes of Business Risks in Insurance

Causes of Business Risks

Business risks arise due to a variety of causes, which are classified as follows:

i. Natural Causes

Human beings have little control over natural calamities like flood, earthquake, lightning, heavy rains, famine, etc. These result in heavy loss of life, property, and income in business.

ii. Human Causes

Human causes include such unexpected events like dishonesty, carelessness or negligence of employees, stoppage of  work due to power failure, strikes, riots, management inefficiency, etc.

iii. Economic Causes

These include uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method ofproduction, etc. Financial problems like rise in interest rate for borrowing, levy of higher taxes, etc., also come under this type of causes as they result in higher unexpected cost of operation of business.

iv. Other Causes

These are unforeseen events like political disturbances, mechanical failures such as the bursting of boiler, fluctuations in exchange rates, etc. which lead to the possibility of business risks.