What is the goal of insurance in regards to risk?

The goal of insurance in regards to risk is to transfer the financial burden of risk. This means that when individuals or businesses purchase insurance, they are essentially shifting the potential financial consequences of certain risks to the insurance company. In doing so, they can protect themselves against significant financial losses that might arise from unforeseen events such as accidents, illnesses, or natural disasters.

When risks are transferred to an insurer, the insurance company pools the risks from many policyholders. This allows the insurer to cover losses for individuals who experience an event while others, who do not experience a claim, pay for the coverage. Thus, while not every risk can be eliminated, insurance provides a mechanism to manage and absorb the financial impact of those risks, allowing policyholders peace of mind in the face of uncertainty.

Other options, such as eliminating all potential risks or predicting future risks accurately, are not realistic goals for insurance. Risks can be unpredictable, and while measures can be taken to reduce or manage them, complete elimination is generally unachievable. Additionally, increasing the probability of loss contradicts the fundamental purpose of insurance, which is to protect against losses rather than promote them.