Evolution of the Concept of Risk

Oliver G. Wood, M.A., is a Teaching Assistant in the Department of Finance and Insurance in the University of Florida and is a Doctoral candidate in Economics at that University. 1 The following quotations are taken from textbooks using this definition: "Risk may be defined simply as the chance of loss." J. Edward Hedges and Walter Williams, Practical Fire and Casualty Insurance (Cincinnati: The National Underwriter Company, 1961), p. 1. "Risk is the chance of loss." Albert H. Mowbray, Insurance (1st ed.; New York: McGrawHill Book Company, Inc., 1930), p. 3. "Risk: (1) The subject of insurance whether a person or a thing (2) chance of loss." Insurance Department, Chamber of Commerce of the United States, Dictionary of Insurance Terms, 1949, p. 58. 2 Examples of this definition are: "Risk may be defined as uncertainty in regard to cost, loss, or damage." C. 0. Hardy, Risk and Risk Bearing (Chicago: The University of Chicago Press, 1923), p. 1. "Risk is uncertainty...." Albert H. Mowbray and Ralph H. Blanchard, Insurance (5th ed.; New York: McGraw-Hill Book Company, Inc., 1961), p. 3. This is Blanchard's definition. In earlier editions of which Mowbray was the sole author, risk was defined as the chance of loss. "Risk may be defined as objective uncertainty." Clyde J. Crobough and Amos E. Redding, Casualty Insurance (New York: Prentice-Hall, Inc., 1929), p. 1. "Risk, or uncertainty of loss, is a normal condition of life, especially of modern industrial life." C. A. Kulp, Casualty Insurance (New York: The Ronald Press Company, 1928), p. 3. "Risk is uncertainty." Frank Joseph Angell, Insurance, Principles and Practices (New York: The Ronald Press Company, 1959), p. 4. 3 The following citations illustrate this method of defining risk: "The uncertainty of the happening of an unfavorable contingency has been At first glance, the difference between these definitions seems to depend on what is meant by "chance" and "uncertainty." If both of these terms denote the possibility of a loss, then these definitions would not appear to differ to any great extent. However, if "chance" and "uncertainty" have different connotations, then there are logical grounds for stating that a problem exists as to the definition of risk.