What is the primary goal of risk management in insurance?

The primary goal of risk management in insurance is to minimize potential financial loss. This is achieved by identifying, assessing, and prioritizing risks, followed by taking appropriate steps to mitigate them. Effective risk management allows insurers to protect both their clients and their own financial stability. By implementing risk control measures, insurers seek to reduce the likelihood of loss and the severity of losses that may occur, ensuring that they can meet their obligations to policyholders and maintain overall business viability.

While increasing premiums might seem related to revenue generation, it is not the core purpose of risk management but rather a byproduct of understanding risk levels. Similarly, expanding coverage options is an important aspect of customer service and product development, but it does not focus directly on managing risk. Ensuring maximum investment returns is related to the financial aspect of an insurance company but is not tied to the principal objectives of risk management, which centers on loss prevention and mitigation.