Loss (Schaden)
A loss is the involuntary reduction in material or immaterial value caused by an insured event, giving rise to the insured event under the policy.
Concept
A loss is the involuntary reduction in material or immaterial value suffered by a person, an object, or an estate as a result of an event. In insurance, the term specifically denotes the reduction in wealth caused by an insured event, which must be assessed both as to its existence and its amount, and which can give rise to a claim to the contractually agreed insurance benefit.
Types of Loss
A distinction is made, among others, between bodily injury losses, which affect a person’s health or life; property damage losses, comprising the damage to or destruction of physical objects; and pure financial losses, which cannot be classified as either bodily injury or property damage, such as a financial disadvantage arising from negligent advice. For determining the insurance benefit, the distinction between total and partial loss, and establishing the relevant point in time of loss under the agreed cause-based or occurrence-based principle, are also of importance.
Relevance for Insurers
The systematic recording, assessment, and settlement of losses forms the core of an insurer’s operational activity; the aggregated loss data of a portfolio also forms the basis for premium calculation, reserving, and actuarial risk management, for example through claims triangles or the determination of the loss ratio.