Insurance is a method of risk prevention that involves transferring risk to an insurance company. Many people assume that risk management and insurance are the same thing, but this is not entirely true.

In an insurance transaction, there are two parties involved – the insured and the insurer. The insurer guarantees that the insured person will be reimbursed for any loss incurred because of an event that may or may not happen in the future. In return, the insured is obligated to pay the insurer a sum of money, which is usually referred to as a premium.

Looking at insurance from different perspectives, we can see that it has various goals and techniques:

A. From an economic perspective, the goal is to reduce uncertainty and achieve one’s goals. The technique involves transferring risk to a party that can estimate the probability of loss more accurately.

B. From a legal perspective, the goal is to transfer risk to another party. The technique involves paying premiums to the insurer, which then assumes the risk.

C. From a trade perspective, the goal is to share risk among all participants. The technique involves transferring risk to financial institutions engaged in risk management.

D. From a societal perspective, the goal is to bear losses jointly among all participants. The technique involves contributing to a pool of funds that sympathizes with losses experienced by group members.

E. From a mathematical perspective, the goal is to predict the probability of risk and divide it among all participants. The technique involves calculating probability based on probability theory, which is performed by an actuary or an underwriter.