What is insurance?
Insurance, at its purest and simplest, is the transfer of risk. It allows the risk of financial losses as a result of specified but unpredictable events to be transferred from an individual/organisation to an insurer for a fee or premium.
In other words, if the specified event occurs, the individual organisation can claim compensation or service from the insurer. Insurance is therefore a means of reducing uncertainty. In return for buying an insurance policy for a relatively small premium, the possibility of a larger loss is removed.