In general, what is the goal of risk management in insurance practices?

The objective of risk management in insurance practices is to minimize the financial impact of risks. This approach focuses on identifying, assessing, and prioritizing risks, followed by implementing strategies to mitigate those risks. In the context of insurance, effective risk management seeks to reduce the potential losses an insured party might experience from unforeseen events, while simultaneously maintaining the financial viability of the insurance provider.

By minimizing the financial impact of risks, the insurance industry can ensure that policyholders receive the necessary support when they file claims, while also protecting the insurer's own financial stability. This balance is critical for the long-term sustainability of both the insurance company and its clients.

While eliminating all risks may seem ideal, it is often impractical and unrealistic, as risks are inherent in various business activities. Increasing potential gains from risks can lead to reckless behavior and financial instability, as it tends to prioritize profit over prudent risk-taking. Distributing risks among different companies is a method used within the industry but is not the overarching goal of risk management itself. Ultimately, the focus is on minimizing financial exposure and managing risks effectively to create a safer environment for businesses and consumers alike.