Risk can be defined as the uncertainty as to the occurrence of a loss to the life or the property. Uncertainty and probability are two different factors.
Before analysing the relationship between risk and insurance, we must understand the difference between risk and probability.
The terms hazard and peril are more closely related to the probability than they are to risk.
For example, collision is a peril that causes the accident. The condition that makes the occurrence of collision more likely is called the hazard. For example, a religious procession is the hazard that creates the peril of riot.
This means probability of riot increases when the hazard of religious procession chanting slogans and songs creates the peril of riot. Therefore, one can say that probability is the long run chance that out of a given number of possibilities, certain number of specific events will occur.
But risk is the uncertainty as to the occurrence of a loss. This is measured in the terms of degree of variation that actual events bear to probable events. The larger the number of exposures, the smaller is the risk. This is because under this situation the smaller is the variation that actual events bear to the probable events. This is called the law of large numbers.

Those who suspect the insurance as gambling must know this law, which is the mechanism in the functioning of insurance.