As we know one way of risk prevention is to insure a risk to the insurance company. This method is considered the most important method in tackling risk. Therefore many people think that risk management is the same as insurance. Though the actual circumstances are not so.
Insurance means the insurance transaction, which involves two parties, the insured and the insurer. Where the insurer guarantees the insured person, that he will be reimbursed for a loss which he may suffer, as a result of an event that would not necessarily occur or which could not be determined when or when it occurred. As the insured in the obligation to pay some money to the insurer, the amount of proportion of the sum insured, commonly called "premium".
Viewed from several angles, the insurance has a variety of goals and techniques of splitting, among others:
A. From an economic perspective, then:
Reducing the uncertainty of the results of operations undertaken by a person or company in order to meet the needs or achieve goals.
By transferring the risk to the other party and the other party combining a considerable amount of risk, so it can be estimated with more precise the magnitude of the possibility of loss.
B. In terms of Law, then:
Transferring the risks faced by an object or a business activity to another party.
Through premium payments by the insured to the insurer in the indemnity contract (insurance policy), then the risk of transferring to the insurer.
C. In terms of Trade, then:
Share the risks faced to all participants of the insurance program.
Transferred risk from individuals / companies to financial institutions engaged in risk management (insurance companies), which will share the risk to all participants of the insurance it handles.