THE TZELATiox OF TIIE INDIVIDUAL TO UNCER TAINTY. If we turn now from the social aspects of insurance to eonsider it from the point of view of the insured person, we find that for him its chief is the substitution of cer tainty for uncertainty. of a certain and definite expense for the possibility of an uncertain loss. Every person engaged in any form of industrial activity is exposed to many chances of accidental loss. Some forms of danger may be practically eliminated through the adoption of measures ealeulated to reduce the possibility of loss. Such measures may be grouped under the name prevention. It is to be noticed that the fact that it is possible to avoid the danger of loss in a case by the adoption of preventive measures does not prove that it, i• desirable to do so. Such measures may cost more than they save. Preventive measures, therefore, will be adopted only so far as they are found to be economically advantageous.
A person engaging in industrial activity thuds himself exposed to the possibility of accidental losses from various sources and Of varbms de grees Of uncertainty. To protect himself he may adopt any one of three methods. So far as it Is economically advantageous. a prudent man will adopt preventive measures which will reduce the danger of loss and so lessen the degree of un certainty. Against some of the remaining risks he may, from necessity or by choice. protect him self by making accumulations to replace the capi tal accidentally destroyed. Ile may then be said
to be insuring himself, although the term self insurance is more commonly restricted to such conduct with regard to risks against which it is possible to purchase protection from the insur ance company. Where the transfer of risks to a company is impossible, as ill the case of the danger of a shrinkage in the value of a stock of goods through a change in human wants, the method of self-insurance is the only one that can be adopted. Finally, with respect, to It limited number of risks, protection may be secured by transferring them to insurance companies. and substituting the obligation to make fixed and definite payments to the company for the neces sity of making individual accumulations. The choice between these three methods of preparing to meet uncertain accidental losses will be made by a prudent person on the basis of their relative cost. Where insurance in an established com pany is possible. the choice of self-insurance would never be justifiable, if the cost of insur ance in the •ompany were as low as it could be made with entire safety. It is only because in surance companies fail to reduee premiums to the cost level that many large business concerns tied it advantageous to carry their own risks. 1, large concern with many detached risks can do it where a small concern cannot, but under ideal conditions it. would not be a profitable orocceding even for the former.