Risk refers to the possibility of loss, damage, or harm occurring to a person or property. Insurance is a mechanism that helps to manage and mitigate risk by providing financial protection against unexpected or uncertain events.
The uncertainty of risk is precisely why insurance is necessary.
If the occurrence of a loss or event was certain, there would be no need for insurance, as the affected party would simply need to prepare for the event in advance.
However, because the occurrence of a loss or event is uncertain and unpredictable, insurance helps to provide financial security and peace of mind.
Insurance companies use various techniques and tools to assess and manage risk, including statistical analysis, actuarial science, underwriting, and risk management strategies.