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Functions of Insurance

The document outlines the primary and secondary functions of insurance. The primary functions are to provide certainty of payment for losses, protection from financial suffering due to losses, and risk-sharing among policyholders. The secondary functions include preventing losses, providing capital for investment, improving economic efficiency by reducing worries, and stimulating economic progress by protecting society from large losses.

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5K views8 pages

Functions of Insurance

The document outlines the primary and secondary functions of insurance. The primary functions are to provide certainty of payment for losses, protection from financial suffering due to losses, and risk-sharing among policyholders. The secondary functions include preventing losses, providing capital for investment, improving economic efficiency by reducing worries, and stimulating economic progress by protecting society from large losses.

Uploaded by

BasappaSarkar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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FUNCTIONS OF INSURANCE:

The functions of insurance can be studied into two parts;


1.Primary Functions
2.Secondary Functions

PRIMARY FUNCTIONS: SECONDARY FUNCTIONS


1.Insurance provides certainty 4. Prevention of loss
2.Insurance provides protection 5. It Provides Capital
3.Risk-Sharing 6. It Improves Efficiency
7. It helps Economic Progress
PRIMARY FUNCTIONS:
1.Insurance provides certainty
2.Insurance provides protection
3.Risk-Sharing

Insurance provides certainty of payment at the uncertainty of loss. The uncertainty


of loss can be reduced by better planning and administration.
But, the insurance relieves the person from such a difficult task.
Moreover, if the subject matters are not adequate, the self-provision may prove
costlier. There are different types of uncertainty in a risk.
The risk will occur or not, when will occur, how much loss will be there?
In other words, there is the uncertainty of happening of time and amount of loss.
Insurance removes all these uncertainties and the assured is given certainty of
payment of loss
PRIMARY FUNCTIONS:
1.Insurance provides certainty
2.Insurance provides protection
3.Risk-Sharing

The main function of insurance is to protect the probable


chances of loss. The time and amount of loss are uncertain
and at the happening of risk, the person will suffer the loss
in the absence of insurance.
The insurance guarantees the payment of loss and thus
protects the assured from sufferings. The insurance cannot
check the happening of risk but can provide for losses at the
happening of the risk
PRIMARY FUNCTIONS:
1.Insurance provides certainty
2.Insurance provides protection
3.Risk-Sharing

The risk is uncertain, and therefore, the loss arising from the risk is
also uncertain.
When risk takes place, the loss is shared by all the persons who
are exposed to the risk.
The risk-sharing in ancient times was done only at the time of
damage or death; but today, based on the probability of risk, (he
share is obtained from every insured in the shape of premium
without which protection is not guaranteed by the insurer.
SECONDARY FUNCTIONS
4. Prevention of loss
5. It Provides Capital
6. It Improves Efficiency
7. It helps Economic Progress
The insurance joins hands with those institutions which are engaged in
preventing the losses of the society because the reduction in loss causes the
lesser payment to the assured arid so more saving is possible which will assist in
reducing the premium.
Lesser premium invites more business and more business causes lesser share to
the assured.
So again premium is reduced to which will stimulate more business and more
protection to the masses.
Therefore, the insurance assists financially to the health organization, fire
brigade, educational institutions and other organizations which are engaged in
preventing the losses of the masses from death or damage
SECONDARY FUNCTIONS
4. Prevention of loss
5. It Provides Capital
6. It Improves Efficiency
7. It helps Economic Progress

The insurance provides capital to society. The accumulated


funds are invested in the productive channel.
The death of the capital of the society is minimized to a
greater extent with the help of investment in insurance.
The industry, the business, and the individual are benefited
by the investment and loans of the insurers.
SECONDARY FUNCTIONS
4. Prevention of loss
5. It Provides Capital
6. It Improves Efficiency
7. It helps Economic Progress

Insurance eliminates worries and miseries of losses at


death and destruction of property.
The carefree person can devote his body and soul together
for better achievement, it improves not only his efficiency
but the efficiencies of the masses are also advanced
SECONDARY FUNCTIONS
4. Prevention of loss
5. It Provides Capital
6. It Improves Efficiency
7. It helps Economic Progress

The insurance by protecting the society from huge losses of


damage, destruction, and death, provides an initiative to
work hard for the betterment of the masses.
The next factor of economic progress, the capital, is also
immensely provided by the masses. The property, the
valuable assets, the man, the machine and the society
cannot lose much at the disaster.

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