What is the primary goal of insurance?

The primary goal of insurance is to provide financial protection against unforeseen losses. This function is the essence of what insurance is designed to accomplish. Insurance helps individuals and businesses mitigate the financial impact of unexpected events, such as accidents, illnesses, property damage, or liability claims. By pooling risk among a large group of policyholders, insurance companies can offer coverage that helps protect against these unforeseen losses, thus ensuring that individuals are not left vulnerable in difficult situations.

While the insurer may operate to make a profit, this is a secondary goal and not the primary reason for the existence of insurance. The purpose is fundamentally to safeguard people and entities from financial hardship resulting from unpredictable incidents. Maximizing payouts to insured parties does not accurately reflect the overall aim of insurance, as it focuses more on the outcome rather than the protective service offered. Similarly, while creating legal contracts is a necessary part of offering insurance, it's merely a method to facilitate coverage rather than the primary goal itself.