Final answer:
The incorrect element about insurable risk is that the losses must be potentially catastrophic. Insurable risks must be definable, measurable, and outside the insured's control, but do not need to be catastrophic.
Step-by-step explanation:
The insurance element that is NOT part of an insurable risk is d) Losses resulting from the insured peril must be potentially catastrophic. The other elements listed are indeed part of what makes a risk insurable. For a risk to be insurable, it must meet certain criteria. The loss must be measurable and definable as to time, cause, and location, and the occurrence must be outside of the insured's control. It is also essential that the loss is not too small or insignificant, making the need for insurance unnecessary. However, the loss does not need to be potentially catastrophic; in fact, insurance often covers non-catastrophic losses.
Insurance encompasses the concept of sharing risk among a group, allowing the financial burden of adversities to be distributed. This is achieved through the collection of premiums from the insured group, which is used to compensate those who experience the covered events. The insurance industry relies on statistical models and historical data to estimate risk and accordingly set premiums. Imperfect information and moral hazard are inherent challenges within the insurance industry. Imperfect information refers to the difficulty in precisely determining individual risk, while moral hazard highlights the potential for those insured to take less care to prevent insured against losses.