What is the basic function of insurance as a risk management method?

Diversification of risks: by purchasing insurance, individuals or enterprises can transfer the risks originally borne by themselves to insurance companies, thus diversifying risks and avoiding excessive financial losses caused by accidents.

Absorb losses: when collecting premiums, insurance companies will determine premiums and insured amount according to different risk categories and probabilities, so as to ensure that the insured or beneficiary can get enough economic compensation to help them tide over the difficulties in the event of an insurance accident.