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Montrose: The Gift That Keeps on Giving

The concept of fortuity, or chance, is the cornerstone of insurance and its operation. Individual losses must be unpredictable and, through the magic of the law of large numbers, these individual losses collectively must be predictable.

Unless a loss is fortuitous, it is not insurable. Otherwise, those who knew a loss would occur or could somehow influence the occurrence would buy insurance and those who knew that a loss would not occur would not buy it. This “adverse selection” plays havoc with sound actuarial predictions.

It is that simple. Or is it?

Joseph M. Junfola

Insurance Claim Consultant

Junfola Claim Consulting