Role of Insurance in Economic Development

For economic development, investments are necessary. Investment are made out of savings. A life insurance company is a major instrument for the mobilization of saving of people, particularly from the middle and lower income groups. These saving are channeled into investments for economic growth. The Insurance Act has strict provisions to ensure that insurance funds are invested in save avenues, life Government bonds, companies with record of profits and so on.This is most important Role of Insurance in Economic Development.

A life insurance company's funds are collected by way of premiums. Every premium represents a risk that is covered by that premium. In affect, therefore, these vast amounts represents pooling of risks. The funds are collected and held in trust for the benefit of the policy holders. The management of life insurance companies are required to keep this aspect in mind and make all its decisions in ways that benefit the community. This applies also to its investments. That is why successful insurance companies would not be found investing in speculative ventures. Their investments, as in the case of L.I.C., benefit the society at large.This is another Role of Insurance in Economic Development

Another Role of Insurance in Economic Development, A part of investment, business and trade benefit through insurance. Without insurance, trade and commerce will find it difficult to face the impact of major perils like fire, earthquake, floods, etc. Financiers, like banks, would collapse if the factory, financed by it, is reduced to ashes to ashes by a terrible fire. Insurers cover also the loss to financiers, if their debtors default.

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