What does 'risk management' aim to achieve within an insurance framework?

Risk management aims to minimize the financial impact of potential losses, which is crucial in the insurance framework. This process involves identifying, assessing, and mitigating risks that could lead to losses for both the insurer and the insured. By implementing effective risk management strategies, an insurance provider can protect its assets, maintain financial stability, and ultimately ensure the availability of coverage for policyholders.

In the context of insurance, minimizing potential losses not only helps clients avoid economic hardship in the event of a claim, but it also ensures that the insurer can fulfill its obligations. Proper risk management helps to maintain premium levels and can enhance the overall sustainability of the insurance provider's operations.

While maximizing profits is a desirable outcome for an insurance provider, it is often a byproduct of effective risk management rather than a primary objective. Reducing the number of claims or ensuring regulatory compliance are also important aspects of the insurance industry, but they do not capture the core aim of risk management, which focuses specifically on the financial impact of potential losses.