What is the main goal of insurance?

The main goal of insurance is to provide risk management. This fundamental purpose centers around the concept of managing uncertainty and protecting individuals and businesses from potential financial losses due to unforeseen events, such as accidents, illnesses, or natural disasters. Insurance operates on the principle of pooling risk, where many individuals or entities pay premiums into a shared fund. This fund is then used to compensate those who experience covered losses, thus providing a safety net and promoting financial stability.

In essence, insurance allows people to transfer the financial risk they cannot fully bear themselves to an insurance company. By doing so, it fosters a sense of security, enabling individuals and businesses to navigate their daily lives and operations with greater confidence, knowing they have protection against potential financial hardship.

While profit generation, wealth accumulation, and meeting regulatory requirements are aspects associated with the insurance industry, they are not the primary objective of insurance itself. Instead, they can be seen as secondary outcomes that arise from successfully fulfilling the main goal of providing effective risk management solutions.