Risk Management Professional Exam Prep

Answer: True. Insurance is inherently about transferring risk. By aggregating individual risks into a pool, insurance companies can protect individual people and firms against risk. This is at a cost, of course.

Key Takeaway: There are other ways to transfer risk, such as putting clauses in contracts, but insurance is one of the most effective ways to manage risk. This is especially case for external risk, which should always be carefully analyzed.