What is the main objective of risk management in insurance?

The main objective of risk management in insurance is to minimize the financial loss for an insured event. This focus is essential because insurance is fundamentally about protecting individuals and organizations from unforeseen risks that could lead to significant financial burdens. Through effective risk management strategies—such as risk avoidance, risk reduction, risk transfer, and risk retention—insurance companies aim to mitigate potential losses associated with claims. By emphasizing the minimization of financial loss, insurers can provide policyholders with peace of mind, knowing they are protected against various risks while also ensuring the long-term sustainability of the insurer’s operations.

In the context of the other options, while increasing profits, simplifying the claims process, and determining coverage rates are important aspects of the insurance business, they are not the primary objective of risk management itself. Rather, these elements support the overall aim of reducing the financial impact of risks on insured individuals and businesses.