What defines the Risk Management process in insurance?

The Risk Management process in insurance is fundamentally about identifying, assessing, and controlling risks. This involves a systematic approach where insurers and policyholders work to identify potential risks that could lead to losses, evaluate the potential impact of these risks, and then implement strategies to mitigate or eliminate them.

This process is critical in helping both insurers and clients to understand the nature of the risks involved, allowing for more informed decisions regarding coverage, underwriting, and policy limits. It lays the groundwork for how insurance products are designed and offered, ensuring that both parties are adequately protected against unforeseen events.

Establishing financial reserves for claims, negotiating lower premiums, and marketing insurance products are important functions within the insurance industry, but they are not foundational elements of the Risk Management process itself. Instead, these activities may emerge as outcomes or supports that stem from robust risk management practices.