Their policy is to engage in massively more violence than anybody who attacks them. It’s not a crazy policy because a huge chunk of the Palestinians think that the existence of a draft in Israel means it’s morally acceptable to kill Israeli kids because they’ll be drafted in the future, so what’s left is to be so destructive that it deters future attacks.
A negotiated two-state solution would be much better for all involved, but actually making that happen is going to require removing Hamas first, and there isn’t a nonviolent way to do that.