Insurance is becoming a vital part of the world economy. Besides, some developed countries like –Germany, France, England, Switzerland are used to use insurance in their regular life. The people of these countries have trust in insurance. So, there are so many insurance companies and people are relying on them. People are insured all of their assets. However, the most role of insurance is it protects people and businesses against certain potential losses.
There are many types of insurance. These types play a great role in society. Such as –
• Motorbike insurance
• Property insurance
• Medical insurance
• Life insurance ( Widely used)
All of these have great importance in society. Life insurance is a widely used insurance in insurance types. Besides, it has a positive effect on their lifestyle, social activity, and longevity.
In the economy, insurance plays a great role. Besides, policyholders and insurers meet directly with each other in the insurance market. Thus, economic growth is increased positively with the activity of insurance markets. Besides, it helps to increase the country’s GDP and also increases employment in the economy. However, it improves economic and financial stability. This is the main advantage of insurance. Moreover, some specialist’s argued that insurance is a reliable system in the economy.
The roles of insurance in the world economy are described below:
1. Insurance provides safety and security
Insurance provides financial support along with decreases danger in economic and social life. Besides, all people always fear sudden accidents or losses. At that time, if any kinds of accident occur the policyholder may get financial support from the insurance company. However, insurance helps a lot by providing a cover against any sudden accident.
For example: if the earning member of a family died, the nominee of this family gets financial support from the insurer.
2. It makes financial resources
Insurance is a foundation and utilization process. It is established to eliminate the damages from sudden losses. Besides, it provides financial support to the people. However, the main roles of insurance are that it generates financial resources by collecting insurance premiums. Besides, they invested this collected funds to government projects and stocks. Through this process, the economic development of every country is increase.
3. It increases savings
Insurance encourages people to make savings. Life insurance is the best common form of it. Through regular premiums, life insurance increases people’s savings. Besides, it builds a habit of saving money by paying premiums. However, the policyholder gets a huge sum of money at the maturity of the contact. Thus it encourages savings.
4. It spreads risks
We all are Well known that danger can occur at any time. At that time, insurance protects people from losses.
5. It gives medical support to society
Many companies arrange medical insurance for their workers. It is considered essential in maintaining risk in health. Unexpectedly, many workers can feel sick or affected by critical diseases. In that time insurance will help them by providing financial support. The policyholder can get medical facilities having medical insurance. It always protects people from illness and also gets treatment from it. Thus, medical insurance plays a great role in the society.
I hope, we all clearly understand the role of insurance in the world economy.