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Insurance Laws and Practices

Notes measures to prevent them. They also support several medical programs in order to make
the public safety minded. Without such losses preventive activities of insurance companies,
the chances of loss would have been greater than they are at present days.
7. Solution of social problems: Insurance serves as a useful device for solving complex social
problems e.g. compensation is available to victims of Industrial injuries and road accident
while the financial difficulties arising from old age, disability or death are minimized. It
thus enables many families and business units to continue intact even after a loss.

8. Productive utilization of fund: Insurer accumulates large resources from the various
insurance funds. Such resources are generally invested in the country, either in the public
or private sector. This facilitates considerably in overall development of the economy.
9. Insurance as an investment: A life policy is a combination of protection and investment
which serves a useful purpose. The premium that is paid by insured goes on accumulating
in a fund every year. The sum so accumulated by the insurance company earns interest.
Under life assurance a person may also invest his capital in an annuity which will pay him
an income every year till death. Therefore, insurance may be regarded as an investment.
10. Promotion of international trade: The growth of the international trade of the country
has been greatly helped by shifting of risk to insurance company. A ship sailing in the sea
faces some miss-fortune. A fire breaks out and burns to ashes all the merchandise of a
business man. But insurance is one of the devices by which these risks may be reduced or
eliminated. So industrialists and exporter may devote their full attention toward the
promotion of business which may increase the export activities.
11. Removing fear: Insurance helps to remove various types of fear from the mind of the
people. The insured is secured in the knowledge that the protection of the insurance fund
is behind him if some sad event happens. It thus creates confidence and eliminates worries
which are difficult to evaluate, but the benefit is very real.

12. Favourable allocation of factors of production: Insurance also helps in achieving
favourable allocation of the factors of production. Capital is usually shy in the risky
business. People hesitate to invest their capital where financial losses are great. If protection
is provided against these risks by means of insurance, several investors will become
ready to invest their funds in those fields.
13. Growth of Business competition: Insurance enables the small business units to compete
upon more equal terms with the bigger organization. Without insurance it would have
been impossible to undertake the risks themselves. On the other side bigger organization
could absorb, their losses due to great financial strength. Moreover insurance removes
uncertainty of financial losses arising out of the certain causes. It thus increases knowledge
which is one of the most important preconditions of perfect competition.

14. Employment opportunity: Insurance provides employment opportunity to jobless persons
which is helpful for the improvement and progress of social condition
15. Miscellaneous benefits: Following are some other miscellaneous benefits offered by
insurance:
(a) It establishes the relation between the employed and employer by providing various
facilities i.e. group life insurance, social security scheme, retirement income plan,
and workman’s compensation insurance.
(b) Insurance creates the confidence and sense of security among the policy holder.

(c) Insurance company provides valuable services of skilled and expert persons to
industries and business in order to eliminate various risks.

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