What is the primary objective of insurance?

The primary objective of insurance is to provide financial security against loss. This principle lies at the heart of insurance operations, which aim to protect individuals and businesses from the financial burden that can arise due to unforeseen events such as accidents, natural disasters, theft, or health-related issues. By pooling resources from many policyholders, an insurance company can offer coverage, helping to ensure that those facing losses can receive compensation and support, thus maintaining their financial stability.

While creating profit for the insurer is a necessary aspect of the insurance business model, it is not the primary objective; rather, it is a byproduct of successfully providing coverage and managing risk. Determining risk factors and eliminating uncertainty are important functions within the insurance process, but these are means to an end—ultimately, the end goal remains centered on providing financial security for policyholders.