Insurance: The Importance Of Insurance

Insurance is the equitable transfer of risk of a loss, from one entity in exchange of money. In today’s world, it is difficult to find a person who is not fully insured. Thus, insurance is a means to manage possible risks, as no one wants to face any type of a loss. It is evident that the insurance companies are now profiting to a greater extent since everyone wants to be on a safer side and avoid risks. This has in turn helped in the economy’s development and growth.

This paper will thus focus on the importance of insurance and the insurance companies. And how they have not only fostered the economy’s development, but has also accelerated its growth.

Insurance is a risk transfer mechanism, where the burdens of an individual

It provides an indication of the existing risks and how probable is the loss that may occur.

In these various ways, we see how important is insurance especially in a developing economy.

The benefits of insurance can be seen in the whole country. Its main effect can be seen in the employment sector. Insurance has helped in generating employment opportunities in various fields of occupations. It allows companies to produce cars, houses, jewelleries and other substantially expensive items even if they are damaged or stolen. Due to this, people keep working in their companies as to help produce these assets and thus, keep their jobs. Apart from this, the insurance companies themselves are major employers to a majority of people.

Insurance also stimulates the economy. The large amount of money that is distribute through policy benefits has a trickle down effect which is felt in all corners of the economy. They are also a major investor in stocks and bonds that helps and accelerates the financial

It also provides protection against rising health expenses. It also serves as a safe option as it helps in long-term savings apart from protecting the individual.

Before the LPG Reforms of 1999, there were a number of foreign and Indian insurers operating in the Indian market. The government consolidated around 250 insurance companies into one single firm that is the Life Insurance Corporation. It was the only sole provider. So, the industry was transformed from a competitive one to a monopoly. This was to increase insurance market penetration through nationalisation and to protect the interests of the policy holders from failures which were the result of mismanagement.

The Indian insurance industry has undergone transformational changes since 2000 when the industry was liberalised. With a one-player market to 24 in 13 years, the industry has witnessed phases of rapid growth along with extent of growth moderation and intensifying competition. When India became open to foreign investment, the banking and financial sectors were reformed. By opening up of the economy, the life insurance witnessed dynamic changes as a number of global and foreign companies entered and increased the competition between the Indian