IMPORTANCE OF INSURANCE IN COMMERCE

by

IMPORTANCE OF INSURANCE IN COMMERCE

1. It creates confidence among businessmen and Investors
Insurance creates confidence among the businessmen and investors to undertake risky business ventures without fear of loss in which they would otherwise not have invested their money.
2. Provide Compensation
Insurance Companies compensate the unfortunate people who actually suffer loss as a result of Insured risk.

  1. It is a means of saving
    This is particularly true with life assurance policies which is a suitable way of saving money for old age, disability and retirement. Also money paid as premium can be used to help the family after the death of the wage earner.
    4. Assured policies act as security for loans
    Businessman who is short of money can use his Insurance Policy as security for the loan from the bank or any other Credit Financial Institution and thus raise capital for the business.
    5. Provide employment opportunities
    Insurance Companies provide employment opportunities to the general society. Some are employed as Manager, Insurance Agent, Insurance Brokers, Secretaries etc. hence solve the problem of unemployment in the country.
    6. Provide Government Revenue
    Insurance Companies pay tax to the government which can be used to develop infrastructures like roads, hospitals, schools etc. Again Insurance contributes towards a country invisible Exports  just like tourism, shipping and banking.
    7. Insurance promotes investment
    The owners or proprietors of the Insurance Company can put to use money so collected as premium to set up business ventures like houses for rent, factory or in stock shares. This helps to generate funds to pay for the claims made on Insurance companies.
  2. Promotes International Trade
    Insurance promotes International Trade whereby businessmen can transport their goods from one country to another without fear or loss.
    9. Educates the public
    Insurance Companies provide educational services. They conduct campaigns on safety, heath care, disease etc. through mass media like radio, television, newspapers. This promote better standard of living of the public.

Also See >>>  WHAT IS RECORD AND INFORMATION MANAGEMENT: KEY DEFINITION

HOW INSURANCE MAKE THEIR PROFIT

The main source of income for insurance companies is as follows;

  1. Premiums contributed by the insured.
  2. Insurance company Construct their own building e.g. ‘KITEGA UCHUMI’ receive rent insurance investment
  3. Provide loans.

Insurance provide loans to their members with the expectation of return of interests.

  1. Selling the scraps.

When insurance settle the claim; the remaining property scraps is sold by them hence making profits.

  1. Securing bank.

The money contributed as a premium is kept at bank hence get interests of saving.

  1. Buying shares.

Insurance companies buy shares from different companies.

INSURANCE AND ASSURANCE

Insurance refers to cover against events which may or may not happen e.g fire Insurance, theft, accident WHILE;Assurance covers against an event that is bound to happen, the uncertainty of which being the time at which it will happen. This is in respect of death. This event will occur in the life of everyone hence life policies are assurance policies.

Also Read >>> Business Development Executive: Apply Now