Life & Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The process of analyzing exposures and designing programs to manage risks is referred to as risk management. This holistic approach encompasses identifying potential risks to an organization or individual, assessing the likelihood and potential impact of those risks, and implementing strategies to mitigate or control them.

Risk management involves a systematic method for addressing risks, which can include developing policies, procedures, and practices to prevent or lessen the effect of unexpected events. This may also involve ongoing monitoring and reviewing risk profiles to ensure that the strategies in place remain effective.

While other processes like risk avoidance, risk retention, and risk transfer are components of the broader risk management strategy, they do not encompass the full scope of analyzing and designing risk management programs on their own. Risk avoidance focuses on eliminating risk entirely, risk retention involves accepting the risk, and risk transfer means shifting the risk to another party, such as through insurance. Thus, risk management is the comprehensive approach that integrates these strategies into a cohesive framework for optimizing risk outcomes.